<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
UUNET TECHNOLOGIES, INC.
(Name of Issuer)
Common Stock, $.0001 par value
(Title of Class of Securities)
918096108
(CUSIP Number)
Terrence J. Ferguson, Esq.
Senior Vice President, Secretary and General Counsel
MFS Communications Company, Inc.
3555 Farnam Street, 2nd Floor
Omaha, Nebraska 68131
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 29, 1996
(Date of Event which Requires Filing this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [X].
<PAGE>2
SCHEDULE 13D
CUSIP No. 918096108
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MFS Communications Company, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
a[ ]
b[x]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
None
SHARES 8. SHARED VOTING POWER
BENEFICIALLY 19,580,725
OWNED BY
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON None
WITH
10. SHARED DISPOSITIVE POWER
19,580,725
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,580,725
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
60.7%
14. TYPE OF REPORTING PERSON*
CO
<PAGE>3
SCHEDULE 13D
CUSIP No. 918096108
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MFS Global Internet Services, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
a[ ]
b[x]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
None
SHARES 8. SHARED VOTING POWER
BENEFICIALLY 19,580,725
OWNED BY
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON None
WITH
10. SHARED DISPOSITIVE POWER
19,580,725
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,580,725
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
60.7%
14. TYPE OF REPORTING PERSON*
CO
<PAGE>4
Explanatory Note:
As a result of executing the Stockholder Option, Voting and
Proxy Agreement dated as of April 29, 1996 (the "Agreement") with the
stockholders listed on Exhibit A to the Agreement (the "UUNET Stockholders") and
MFS Global Internet Services, Inc., a Delaware corporation ("Sub") and a wholly
owned subsidiary of MFS Communications Company, Inc., a Delaware corporation
("Parent"), Parent and Sub may be deemed, for the purposes of Section 13(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), to have formed a
"group" with the UUNET Stockholders. Parent and Sub understand that the UUNET
Stockholders will file separate Statements on Schedule 13D with respect to the
proposed transactions.
The information regarding the UUNET Stockholders contained in
this Statement on Schedule 13D is provided to the best knowledge of Parent and
Sub and, unless otherwise indicated, is based on information provided to Parent
and Sub by the UUNET Stockholders.
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to shares of Common
Stock, $.001 par value per share (the "Shares") of UUNET Technologies, Inc., a
Delaware corporation (the "Issuer"). The address of the principal executive
offices of the Issuer is 3060 Williams Drive, Fairfax, Virginia 22031.
Item 2. Identity and Background.
(a)-(c) and (f). This Statement is being filed by Parent and
Sub. Parent is organized under the laws of the State of Delaware, and its
principal business address is 3555 Farnam Street, 2nd Floor, Omaha, Nebraska
68131. Parent is engaged in the business of providing telecommunications
services.
Sub is organized under the laws of the State of Delaware, and
its principal business address is 3555 Farnam Street, 2nd Floor, Omaha, Nebraska
68131. Sub was organized for the purpose of consummating the transaction
contemplated under the Merger Agreement (as defined below).
The names, business addresses, principal occupations and
citizenship of the directors and executive officers of Parent are set forth in
Annex A hereto and are incorporated herein by reference and the directors and
executive officers of Sub are set forth in Annex B hereto and are incorporated
herein by reference.
(d) and (e). During the last five years, Parent and Sub and,
to the best knowledge of Parent and Sub, the executive officers and directors of
Parent and Sub have not (i) been convicted in a criminal proceeding (excluding
traffic violations
<PAGE>5
and similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Parent has the option (the "Option"), exercisable only in
certain circumstances which have not yet occurred, to acquire from the UUNET
Stockholders up to approximately 60.7% of the Shares outstanding as of April 26,
1996, for 1.777776 fully paid and nonassessable shares of the common stock, par
value $.01 of Parent (the "Parent Common Stock") per share, pursuant to the
Agreement, a copy of which is attached as Exhibit 1 hereto, and is incorporated
herein by reference. Execution and delivery of the Agreement by the UUNET
Stockholders was a condition to the execution of the Agreement and Plan of
Merger dated as of April 26, 1996, among Parent, Sub and the Issuer (the "Merger
Agreement"), a copy of which is attached as Exhibit 2 hereto and incorporated
herein by reference.
Item 4. Purpose of Transaction.
On April 29, 1996, Parent, Sub and the UUNET Stockholders
entered into the Agreement. Pursuant to the terms of the Agreement each UUNET
Stockholder granted Parent an option (the "Option") to purchase all of the
Shares held by such UUNET Stockholder on the date of exercise of the Option
(19,580,725 shares as of the date of the Agreement representing approximately
60.7% of the Shares outstanding as of the date of the Agreement) at a per share
purchase price of (i) 1.777776 shares of Parent Common Stock, subject to certain
adjustments, and (ii) the associated rights under Parent's Rights Agreement (the
"Rights Plan") dated September 30, 1995 between Parent and Continental Stock
Transfer & Trust. In addition, each UUNET Stockholder has agreed to vote in
favor of the transactions contemplated by the Merger and has agreed to appoint
Parent and Sub as its attorney and proxy for such purpose.
The purpose of the transactions under the Agreement is to
enable Parent to consummate the transactions contemplated under the Merger
Agreement. Pursuant to the terms of the Merger Agreement, Sub will merge (the
"Merger") with and into the Issuer, and the Issuer will be the surviving
corporation.
Pursuant to the Agreement, Parent has the right to acquire all
of the Shares beneficially owned by the UUNET Stockholders in exchange for
shares of Parent Common Stock and associated rights under Parent's Rights Plan.
<PAGE>6
Upon consummation of the Merger, the Shares would cease to be
authorized to be quoted on the Nasdaq National Market and would become eligible
for termination of registration pursuant to Section 12(g)(4) of the Exchange
Act.
Except as otherwise set forth in this Item 4, neither Parent
nor Sub has any present plans or proposals which relate to or would result in
(i) the acquisition by any person of additional securities of the Issuer, or the
disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (iii) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (iv) any change in the
present Board of Directors or management of the Issuer; (v) any material change
in the present capitalization or dividend policy of the Issuer; (vi) any other
material change in the Issuer's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Issuer by any person; (viii) causing the Shares to cease to be authorized to be
quoted or the National Market System of the National Association of Securities
Dealers Automated Quotation System; (ix) the Shares becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(x) any action similar to any of those actions set forth in this Paragraph.
Item 5. Interest in Securities of Issuer.
(a) and (b). Parent has an Option, exercisable only in certain
circumstances, to acquire from the UUNET Stockholders up to approximately 60.7%
of the Shares outstanding on April 26, 1996. Based upon the representations of
the Issuer contained in the Merger Agreement, there were 32,258,139 Shares
outstanding as of April 26, 1996. The Option is exercisable for 19,580,725
Shares, or, based on such representation, approximately 60.7% of the outstanding
Shares after taking into effect the exercise of the Option. When and if Parent
acquires such Shares, it will have sole voting and investment power with respect
thereto.
Pursuant to the Agreement, each UUNET Stockholder has agreed
to vote such UUNET Stockholder's Shares at any meeting of the Issuer's
stockholders or any adjournment or postponement thereof or pursuant to any
consent in lieu of a meeting or otherwise in favor of the Merger Agreement and
against any proposal for any recapitalization, merger (other than the Merger),
sale of assets or other business combination between the Issuer and person or
entity (other than Parent or Sub) or any other action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of Issuer under the Merger Agreement or which would
result in any conditions to the Merger Agreement not being fulfilled. In
addition, each of the UUNET Stockholders have
<PAGE>7
agreed to appoint Parent and Sub as its attorney and proxy for
such purpose (the "Proxy").
Other than the Option and Proxy described above, neither
Parent, Sub nor any of their respective subsidiaries beneficially owns any
Shares. To the best knowledge of Parent and Sub, none of Parent's or Sub's
executive officers and directors beneficially own any Shares. Parent and Sub
disclaim beneficial ownership of such Shares and, notwithstanding anything to
the contrary contained in this Schedule 13D, and in accordance with Rule 13d-4
promulgated under the Act, the filing of this Schedule 13D shall not be
construed as an admission that Parent or Sub is the beneficial owner of such
Shares.
(c) There have been no transactions in Shares or, to the best
knowledge of Parent and Sub, by any of Parent's or Sub's executive officers and
directors, during the past 60 days.
(d) To the knowledge of Parent and Sub, the right to receive
dividends with respect to the Shares to which this Schedule 13D relates, and the
power to direct the receipt of dividends from, or the proceeds of the sale of,
such Shares held by each of the UUNET Stockholders are held by such UUNET
Stockholder as reflected on Exhibit A to the Agreement.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Other than the Merger Agreement described in response to Item
4 (which response is incorporated herein by reference) and the Agreement
described in response to Item 3 (which response is incorporated herein by
reference) and the transactions contemplated thereby, there are no contracts,
arrangements, understandings or relationships between Parent or Sub and any
other person, or, to the best knowledge of Parent and Sub, among any of Parent's
or Sub's executive officers and directors or between any of Parent's or Sub's
executive officers and directors and any other person, with respect to the
Shares.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 Stockholder Option, Voting and Proxy Agreement dated
as of April 29, 1996
Exhibit 2 Agreement and Plan of Merger dated as of April 29,
1996
Exhibit 3 Joint Filing Agreement dated as of May 9, 1996
<PAGE>8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: May 9, 1996 MFS Communications Company, Inc.
By: /s/ James Q. Crowe
James Q. Crowe
Chairman of the Board and
Chief Executive Officer
MFS Global Internet Services, Inc.
By: /s/ Albert L. Fenn, Jr.
Albert L. Fenn, Jr.
President
<PAGE>9
ANNEX A
IDENTITY AND BACKGROUND
Listed below are the names, addresses and principal
occupations of the directors and executive officers of MFS Communications
Company, Inc. Each of the persons listed below is a United States citizen.
1. Directors
<TABLE>
<S> <C> <C>
Name Address Principal Occupation
James Q. Crowe 3555 Farnam Street Chairman of the Board and Chief,
Suite 200 Executive Officer, MFS
Omaha, Nebraska 68131 Communications Company, Inc.
Royce J. Holland 3555 Farnam Street President and Chief Operating
Suite 200 Officer, MFS Communications Company,
Omaha, Nebraska 68131 Inc.
R. Douglas Bradbury 3555 Farnam Street Executive Vice President and Chief
Suite 200 Financial Officer, MFS
Omaha, Nebraska 68131 Communications Company, Inc.
Howard Gimbel 3555 Farnam Street Partner, B.G. Management Co.;
Suite 200 President,
Omaha, Nebraska 68131 Health Consultants, Inc.
William Grewcock 3555 Farnam Street Vice Chairman and Director,
Suite 200 Peter Kiewit Sons', Inc.
Omaha, Nebraska 68131
Richard R. Jaros 3555 Farnam Street Executive Vice President, Chief
Suite 200 Financial Officer and Director,
Omaha, Nebraska 68131 Peter Kiewit Sons', Inc.
Robert E. Julian 3555 Farnam Street Director,
Suite 200 Peter Kiewit Sons', Inc.
Omaha, Nebraska 68131
David C. McCourt 3555 Farnam Street Chairman of the Board and Chief
Suite 200 Executive Officer, C-TEC Corporation
Omaha, Nebraska 68131
<PAGE>10
Ronald W. Roskens 3555 Farnam Street President,
Suite 200 Global Connections, Inc.
Omaha, Nebraska 68131
Walter Scott, Jr. 3555 Farnam Street Chairman of the Board and President,
Suite 200 Peter Kiewit Sons', Inc.
Omaha, Nebraska 68131
Kenneth E. Stinson 3555 Farnam Street Executive Vice President and
Suite 200 Director,
Omaha, Nebraska 68131 Peter Kiewit Sons', Inc.
Michael B. Yanney 3555 Farnam Street Chairman and Chief Executive
Suite 200 Officer, America First Companies
Omaha, Nebraska 68131
2. Executive Officers
Name Address Principal Occupation
James Q. Crowe 3555 Farnam Street Chairman of the Board and Chief
Suite 200 Executive Officer, MFS
Omaha, Nebraska 68131 Communications Company, Inc.
Royce J. Holland 3555 Farnam Street President and Chief Operating
Suite 200 Officer, MFS Communications Company,
Omaha, Nebraska 68131 Inc.
R. Douglas Bradbury 3555 Farnam Street Executive Vice President and Chief
Suite 200 Financial Officer, MFS
Omaha, Nebraska 68131 Communications Company, Inc.
Terrence J. Ferguson 3555 Farnam Street Senior Vice President and General
Suite 200 Counsel,
Omaha, Nebraska 68131 MFS Communications Company, Inc.
<PAGE>11
Ronald R. Beaumont 3555 Farnam Street Executive Vice President,
Suite 200 MFS Communications Company, Inc.;
Omaha, Nebraska 68131 Chief Executive Officer,
MFS Telecom Companies
Albert L. Fenn, Jr. 3555 Farnam Street Senior Vice President
Suite 200 Corporate Development,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Michael R. Frank 3555 Farnam Street Senior Vice President
Suite 200 Human Resources,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Philip D. Hamlin 3555 Farnam Street Senior Vice President
Suite 200 and Chief Technical Officer,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Joseph M. Howell, III 3555 Farnam Street Senior Vice President
Suite 200 Corporate Marketing,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Steve Johnson 3555 Farnam Street Senior Vice President
Suite 200 Chief Information Officer,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Andrew D. Lipman 3555 Farnam Street Senior Vice President
Suite 200 Legal and Regulatory Affairs,
Omaha, Nebraska 68131 MFS Communications
Company, Inc.
Robert J. Ludvik 3555 Farnam Street Vice President and Controller,
Suite 200 MFS Communications
Omaha, Nebraska 68131 Company, Inc.
<PAGE>12
Kevin P. Moersch 3555 Farnam Street Senior Vice President,
Suite 200 MFS Communications Company, Inc.;
Omaha, Nebraska 68131 President and Chief Executive
Officer,
MFS Network Technologies, Inc.
Abraham Morris 3555 Farnam Street Senior Vice President
Suite 200 Operations Support,
Omaha, Nebraska 68131 MFS Communications Company, Inc.
Kevin J. O'Hara 3555 Farnam Street Executive Vice President,
Suite 200 MFS Communications Company, Inc.;
Omaha, Nebraska 68131 President and Chief Executive
Officer,
MFS Global Network Services
Sunit Patel 3555 Farnam Street Vice President and Treasurer,
Suite 200 MFS Communications Company, Inc.
Omaha, Nebraska 68131
Kirby G. Pickle 3555 Farnam Street Executive Vice President,
Suite 200 MFS Communications Company, Inc.;
Omaha, Nebraska 68131 Chief Executive Officer,
MFS Intelenet Companies
Frederick W. Weidinger 3555 Farnam Street Vice President
Suite 200 Mergers and Acquisitions,
Omaha, Nebraska 68131 MFS Communications Company, Inc.
Colin V.K. Williams 3555 Farnam Street Executive Vice President,
Suite 200 MFS Communications Company, Inc.;
Omaha, Nebraska 68131 President and Chief Executive
Officer,
MFS International, Inc.
</TABLE>
<PAGE>13
ANNEX B
IDENTITY AND BACKGROUND
Listed below are the names, addresses and principal
occupations of the directors and executive officers of MFS Global Internet
Services, Inc. Each of the persons listed below is a United States citizen.
1. Directors
<TABLE>
<S> <C> <C>
Name Address Principal Occupation
James Q. Crowe 3555 Farnam Street Chairman of the Board and Chief
Suite 200 Executive Officer, MFS
Omaha, Nebraska 68131 Communications Company, Inc.
R. Douglas Bradbury 3555 Farnam Street Vice President and Treasurer, MFS
Suite 200 Global Internet Services, Inc.
Omaha, Nebraska 68131
Terrence J. Ferguson 3555 Farnam Street Vice President and Secretary, MFS
Suite 200 Global Internet Services, Inc.
Omaha, Nebraska 68131
2. Executive Officers
Name Address Principal Occupation
Albert L. Fenn, Jr. 3555 Farnam Street President, MFS Global Internet
Suite 200 Services, Inc.
Omaha, Nebraska 68131
R. Douglas Bradbury 3555 Farnam Street Vice President and Treasurer, MFS
Suite 200 Global Internet Services, Inc.
Omaha, Nebraska 68131
Terrence J. Ferguson 3555 Farnam Street Vice President and Secretary, MFS
Suite 200 Global Internet Services, Inc.
Omaha, Nebraska 68131
</TABLE>
<PAGE>14
EXHIBIT INDEX
Exhibit 1 Stockholder Option, Voting and Proxy Agreement dated April 29, 1996
Exhibit 2 Agreement and Plan of Merger dated April 29, 1996
Exhibit 3 Joint Filing Agreement dated as of May 9, 1996
<PAGE>1
STOCKHOLDER OPTION, VOTING AND PROXY AGREEMENT
DATED AS OF APRIL 29, 1996
AMONG
MFS COMMUNICATIONS COMPANY, INC
MFS GLOBAL INTERNET SERVICES, INC.
AND EACH OTHER PERSON AND ENTITY
LISTED ON THE SIGNATURE PAGES HEREOF.
<PAGE>2
STOCKHOLDER OPTION, VOTING AND PROXY AGREEMENT, dated as of
April 29, 1996, (this "Agreement") among MFS COMMUNICATIONS COMPANY, INC., a
Delaware corporation ("Parent"), MFS GLOBAL INTERNET SERVICES, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and each other
person and entity listed on the signature pages hereof (each, a "Stockholder").
WHEREAS, as of the date hereof, each Stockholder owns of
record the number of shares of common stock, $0.001 par value (the "Common
Stock"), of UUNET Technologies, Inc., a Delaware corporation (the "Company"),
set forth opposite such Stockholder's name on Exhibit A hereto (all such shares,
together with all shares of Common Stock of the Company which are hereafter
acquired by the Stockholders, being referred to herein as the "Shares");
WHEREAS, Parent, Sub and the Company have entered into an
Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement"; capitalized terms used but not otherwise defined in this Agreement
have the meanings assigned to such terms in the Merger Agreement), which
provides, upon the terms and subject to the conditions set forth therein, for
the merger of Sub with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Sub
to enter into the Merger Agreement and in furtherance of the acquisition of the
Company by Parent, Parent and Sub have required that the Stockholders agree, and
in order to induce Parent and Sub to enter into the Merger Agreement, each
Stockholder has agreed, severally and not jointly, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
agreements contained herein, the parties hereto agree as follows:
Article I.
GRANT OF OPTION AND EXERCISE; TRANSFER AND
VOTING OF SHARES
Section 1.1. Grant of Option. Subject to the terms and
conditions set forth herein, each Stockholder hereby grants to Parent an
irrevocable option (the "Option") to purchase all such Stockholder's Shares held
on the date of Option exercise for 1.777776 fully paid and nonassessable shares
of Parent Common Stock (as adjusted in the circumstances described in Section
3.1(c) of the Merger Agreement) per Share, together with the associated rights
under Parent's Rights Agreement ("Parent Rights Plan") dated as of September 30,
1995 between Parent and Continental Stock Transfer & Trust (together, the
"Purchase Price").
<PAGE>3
Section 1.2. Exercise of Option. Parent may exercise the
Option, in whole with respect to all of the Shares held by all of the
Stockholders covered hereby but not in part, at any time following the
occurrence of a Purchase Event (as defined in the Merger Agreement); provided
that, except as provided in the last sentence of this Section 1.2(a), the Option
shall terminate and be of no further force and effect upon the earliest to occur
of (i) the Effective Date, (ii) 20 Business Days after the termination of the
Merger Agreement other than by reason of an event described in clause (iv) or
(v) below, (iii) [INTENTIONALLY OMITTED], (iv) exercise of the Company's right
to terminate the Merger Agreement because of a breach by Parent or Sub of any
covenant or agreement set forth in the Merger Agreement or the failure of any
representation or warranty of the Parent or Sub under Article IV of the Merger
Agreement or of the Parent under Article III of this Agreement to have been true
in all material respects when made or the failure of the holders of capital
stock of Parent to approve the Merger at the Parent Meeting, (v) the Merger
Agreement has been terminated pursuant to Section 10.1(a) or (b) of the Merger
Agreement, or (vi) the failure of the Closing (defined in Section 1.3 below) to
occur within 30 Business Days of the Notice Date (defined in Section 1.3 below)
unless (A) the reason for such failure relates to the inability to satisfy the
conditions to register the shares of Parent Common Stock set forth in Section
1.9 of this Agreement or for the notification period under the HSR Act to have
expired, in either case, for reasons outside of the control of Parent, and (B)
Parent is diligently pursuing the registration of such shares with the
Commission or promptly providing all necessary information to the Federal Trade
Commission and the Antitrust Division of the Department of Justice, as the case
may be. Notwithstanding the termination of the Option, Parent shall be entitled
to purchase the Shares in accordance with the terms hereof if it has exercised
the Option prior to the termination date, unless clause (iv) or (vi) above has
been triggered in which case the rights to exercise this Option shall
immediately cease.
Section 1.3. Closing Date. In the event Parent wishes to
exercise the Option, which may be exercised in whole with respect to all of the
Shares of all of the Stockholders covered hereby but not in part, it shall send
to each Stockholder a written notice (the date of which being herein referred to
as the "Notice Date") specifying a place and date not earlier than five business
days nor later than 10 Business Days from the Notice Date for the closing of
such purchase (the "Closing Date"); provided that if the closing of the purchase
and sale pursuant to the Option (the "Closing") cannot be consummated by reason
of any applicable judgment, decree, order, law or regulation, the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which such restriction on consummation has expired or been terminated;
and, provided
<PAGE>4
further that, without limiting the foregoing, if prior
notification to or approval of any regulatory authority is required in
connection with such purchase, Parent and, if applicable, a Stockholder shall
promptly file the required notice or application for approval and shall
expeditiously process the same (and such Stockholder shall cooperate with Parent
in the filing of any such notice or application and the obtaining of any such
approval), and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (i) any
required notification period has expired or been terminated or (ii) such
approval has been obtained, and in either event, any requisite waiting period
has passed. Parent agrees that it shall include the issuance of shares of Parent
Common Stock under this Agreement in the notifications under the HSR Act filed
pursuant to Section 8.6 of the Merger Agreement.
Section 1.4. Payment and Delivery of Certificates.
(a) On the Closing Date, (i) Parent will deliver to the
Stockholders the Purchase Price and a certificate signed by the
President or Chief Executive Officer of Parent to the effect that
Parent and the Sub have complied with all covenants and agreements set
forth in the Merger Agreement and that all representations and
warranties of the Parent and Sub under Article IV of the Merger
Agreement and of the Parent under Article III of this Agreement were
true in all material respects when made, and (ii) the Stockholders
shall deliver to Parent certificates representing the Shares sold by
the Stockholders to Parent at the Closing, duly endorsed in blank or
accompanied by stock powers duly executed by the Stockholders in blank,
in proper form for transfer.
(b) No certificates or scrip representing less than one share
of Parent Common Stock shall be issued upon the exercise of the Option.
In lieu of any such fractional share, each Stockholder who would
otherwise have been entitled to a fraction of a share of Parent Common
Stock upon exercise of the Option shall be paid at the Closing cash
(without interest) in an amount equal to such Stockholder's fractional
part of a share of Parent Common Stock multiplied by the last reported
sale price of Parent Common Stock, as reported on the Nasdaq National
Market, on the Closing Date.
Section 1.5. Legends.
(a) Each Stockholder shall instruct the Company to cause each
certificate of any Stockholder evidencing the Shares to bear a legend
in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS
<PAGE>5
AND CONDITIONS OF THE STOCKHOLDER OPTION, VOTING AND PROXY
AGREEMENT DATED AS OF APRIL 29, 1996, AS IT MAY BE AMENDED,
AMONG MFS COMMUNICATIONS COMPANY, INC., MFS GLOBAL INTERNET
SERVICES, INC. AND THE REGISTERED HOLDER OF THIS CERTIFICATE,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE ISSUER.
(b) In the event that the Shares shall cease to be subject to
the restrictions on transfer set forth in this Agreement, the Company
shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Shares without the legend
required by Section 1.5(a).
Section 1.6. Voting Agreement. Each Stockholder hereby agrees
that from the date hereof to the earlier to occur of the termination of the
Merger Agreement or the Effective Date, at any meeting of the stockholders of
the Company, however called, and in any action by consent of the stockholders of
the Company, such Stockholder shall vote the Shares; (A) in favor of the Merger,
the Merger Agreement (as amended from time to time) and the transactions
contemplated by the Merger Agreement and (B) against any proposal for any
recapitalization, merger (other than the Merger), sale of assets or other
business combination between the Company and any person or entity (other than
Parent or Sub) or any other action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions to the Merger Agreement not being fulfilled.
Section 1.7. No Disposition or Encumbrance of Shares and
Options. Except to the extent set forth in Exhibit A, each Stockholder hereby
covenants and agrees that, from the date hereof to the termination of the rights
of Parent under Sections 1.2, 1.6 and 1.8 of this Agreement, it shall not, and
shall not offer or agree to, sell, transfer, tender, assign, hypothecate or
otherwise dispose of, or create or permit to exist any Encumbrance (as
hereinafter defined) on the Shares owned by such Stockholder at any time prior
to the Effective Date.
Section 1.8. Voting of Shares; Further Assurances.
(a) Each Stockholder, by this Agreement, with respect to its
Shares, does hereby constitute and appoint Sub and Parent, or any
nominee of Sub and Parent, with full power of substitution, from the
date hereof to the earlier to occur of the termination of the Merger
Agreement or the Effective Date, as its true and lawful attorney and
proxy (its "Proxy"), for and in its name, place and stead, to vote each
of such Shares as its Proxy, at every annual, special or adjourned
meeting of the stockholders of the Company,
<PAGE>6
including the right to sign its name (as stockholder) to any
consent, certificate or other document relating to the Company that the
law of the State of Delaware may permit or require:
(i) in favor of the Merger, the Merger Agreement
(as amended from time to time) and the transactions
contemplated by the Merger Agreement; and
(ii) against any proposal for any recapitalization,
merger (other than the Merger), sale of assets or other
business combination between the Company and any person or
entity (other than Parent or Sub) or any other action or
agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or which
could result in any of the conditions to the Merger Agreement
not being fulfilled.
THIS POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN CONSIDERATION OF
PARENT AND SUB ENTERING INTO THE MERGER AGREEMENT AND IS COUPLED WITH
AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER. This
appointment shall revoke all prior attorneys and proxies appointed by
any Stockholder at any time with respect to the Shares and no
subsequent attorneys or proxies will be appointed by such Stockholder,
or be effective, with respect thereto during the term of this
Agreement.
(b) Each Stockholder shall perform such further acts and
execute such further documents and instruments as may reasonably be
required to vest in Sub and Parent the power to carry out and give
effect to the provisions of this Agreement.
Section 1.9. Registration. Notwithstanding anything in this
Agreement to the contrary, the obligation of the Stockholders to transfer their
Shares to Parent at the Closing shall be conditioned upon the issuance of Parent
Common Stock to the Stockholders being registered pursuant to the Securities Act
at the Closing. Parent shall include such issuance of shares of Parent Common
Stock in the Registration Statement on Form S-4 being filed pursuant to the
Merger Agreement.
Article II.
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby
represents and warrants to Parent as follows:
Section 2.1. Due Organization, Authorization, etc. Such
Stockholder (if it is a corporation, partnership or other
<PAGE>7
legal entity) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Such Stockholder has all requisite power (corporate or otherwise)
to execute and deliver this Agreement, to grant the Option and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the appointment of Parent and Sub as such Stockholder's Proxy, the granting of
the Option and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary action (corporate or otherwise) on the
part of such Stockholder. This Agreement has been duly executed and delivered by
or on behalf of such Stockholder and, assuming its due authorization, execution
and delivery by Parent, constitutes a legal, valid and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with its
terms.
Section 2.2. No Conflicts, Required Filings and Consents.
(a) Except as disclosed on Exhibit A, the execution and
delivery of this Agreement by such Stockholder do not, and the
performance of this Agreement by such Stockholder will not, (i)
conflict with or violate the Certificate of Incorporation by By-Laws or
other similar organizational documents of such Stockholder (in the case
of a Stockholder that is a corporation, partnership or other legal
entity), (ii) conflict with or violate any statute, law, ordinance,
rule, regulation, order, decree or judgment applicable to such
Stockholder or by which it or any of its properties is bound or
affected, or (iii) result in any breach of or constitute a default
(with notice or lapse of time, or both) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the property
or assets of such Stockholder or (if such Stockholder is a corporation,
partnership or other legal entity) any of its subsidiaries, including,
without limitation, the Shares, pursuant to, any indenture or other
loan document provision or other contract, license, franchise, permit
or other instrument or obligation to which such Stockholder is a party
or by which such Stockholder or any of its properties is bound or
affected, except, in the case of clauses (ii) and (iii), for any such
breaches, defaults or other occurrences that would not prevent or delay
the performance by such Stockholder of its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by such
Stockholder do not, and the performance of this agreement by such
Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make
<PAGE>8
such filings or notifications, would not prevent or delay the
performance by the Stockholder of its obligations under this Agreement.
Section 2.3. Title to Shares. Such Stockholder has, and the
transfer by the Stockholder of the Shares hereunder will pass, good and
marketable title to the Shares listed on Exhibit A hereto, free and clear of any
pledge, lien, security interest, mortgage, charge, claim, equity, option, proxy,
voting restriction, right of first refusal, limitation on disposition, adverse
claim of ownership or use or encumbrance of any kind ("Encumbrances"), except to
the extent disclosed on Exhibit A and for Shares sold prior to the Closing as
permitted under Section 1.7.
Section 2.4. No Brokers. Except for Goldman, Sachs & Co. or
as set forth in the Company Disclosure Letter, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such Stockholder.
Article III.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to each Stockholder as
follows:
Section 3.1 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on its business as
it is now being conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary, except
where the failure to be so qualified will not, individually or in the aggregate,
have a material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities or operations of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect"). Complete and
correct copies as of the date hereof of the Certificate of Incorporation and
By-laws of Parent have been delivered to the Company as part of a disclosure
letter delivered by Parent to the Company on or prior to the date of this
Agreement pursuant to the Merger Agreement (the "Parent Disclosure Letter").
Section 3.2 Capitalization. The authorized capital
stock of Parent consists of 400,000,000 shares of Parent Common Stock, and
25,000,000 shares of preferred stock, $.01 par value. As of April 26, 1996
(after giving effect to the stock split on
<PAGE>9
that day), (i) 125,804,234 shares of Parent Common Stock were
validly issued and outstanding, fully paid and nonassessable, (ii) 95,000 shares
of Parent's Series A 8% Cumulative Convertible Preferred Stock, were validly
issued and outstanding, fully paid, and nonassessable and (iii) 15,000,000
shares of Series B Cumulative Convertible Preferred Stock were validly issued
and outstanding, fully paid, and nonassessable. As of the date hereof, there are
no bonds, debentures, notes or other indebtedness having the right to vote on
any matters on which the Parent's stockholders may vote ("Parent Voting Debt")
issued or outstanding. As of April 26, 1996 (after giving effect to the stock
split on that day), except for options to acquire 20,614,274 shares of Parent
Common Stock pursuant to the Parent's 1992 Stock Plan and 1993 Stock Plan,
warrants to purchase 1,500,000 shares of Parent Common Stock, commitments to
issue shares of Parent Common Stock under Parent's Shareworks and Shareworks
Plus programs and commitments to issue shares of Parent Common Stock to
non-employee directors pursuant to Parent's 1993 Stock Plan, and, except as
provided herein and in the Parent Rights Plan, there are no options, warrants,
calls or other rights, agreements or commitments presently outstanding
obligating Parent to issue, deliver or sell shares of its capital stock or debt
securities, or obligating Parent to grant, extend or enter into any such option,
warrant, call or other such right, agreement or commitment. All of the shares of
Parent Common Stock issuable in accordance with this Agreement in exchange for
Company Common Stock at the Closing will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and shall be delivered free and
clear of any pledge, lien, security interest, mortgage, charge, claim, equity,
option, proxy, voting restriction, right of first refusal, limitation on
disposition, adverse claim of ownership or use or encumbrance of any kind
("Encumbrances"), including any preemptive rights of any stockholder of Parent.
Section 3.3 Subsidiaries. The only "Significant Subsidiaries"
(as such term is defined in Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "Commission")) ("Significant Subsidiaries") of Parent
are those named in Section 4.3 of the Parent Disclosure Letter or set forth on
Exhibit 22 to Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. Each Significant Subsidiary incorporated in the United States
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the corporate power to carry
on its business as it is now being conducted or currently proposed to be
conducted. Each Significant Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary except where the failure to be so
qualified will not have a Parent Material Adverse Effect. Except as disclosed in
Section 4.3 of the Parent Disclosure Letter, all
<PAGE>10
the outstanding shares of capital stock of each Significant
Subsidiary are validly issued, fully paid and nonassessable and owned by Parent
or by a Significant Subsidiary of Parent free and clear of any Encumbrances.
There are no existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of any of the Significant Subsidiaries of Parent. Except as set
forth in the Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as disclosed in Section 4.3 of the Parent Disclosure Letter
and except for wholly owned subsidiaries which are formed after the date hereof
in the ordinary course of business, Parent does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity that is a Significant Subsidiary.
Section 3.4 Authority Relative to the Agreement.
(a) Parent has the corporate power to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Parent's Board of
Directors. The Agreement constitutes a valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought. No other corporate
proceedings on the part of Parent are necessary to authorize the
execution and delivery by Parent of this Agreement or the consummation
of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, does not and will
not result in the change in conversion ratios, conversion rights or
voting rights, or the breach, violation, default (with or without
notice or lapse of time, or both), termination, cancellation or
acceleration of any obligation, or the loss of a material benefit,
under (i) the Parent's charter or by-laws or (ii) any indenture or
other loan document provision or other contract, license, franchise,
permit, order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to Parent or any
of its subsidiaries or their respective properties or assets, other
than, in the case of clause (ii) only, (A) any breaches, violations,
defaults, terminations, cancellations, accelerations or losses which,
either singly or in the aggregate, will not have a Parent Material
Adverse Effect or prevent the
<PAGE>11
consummation of the transactions contemplated hereby and (B)
the laws and regulations referred to in the next paragraph.
(c) Except as disclosed in Section 4.4 of the Parent
Disclosure Letter, or in connection, or in compliance, with the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934 (the "Exchange
Act"), and the corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Parent of the transactions
contemplated by this Agreement, other than filings, registrations,
authorizations, consents or approvals the failure of which to make or
obtain will not have a Parent Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby.
Section 3.5 Reports and Financial Statements. Parent has
previously furnished the Company with true and complete copies of its (i) Annual
Report on Form 10-K, as amended, for the fiscal years ended December 31, 1994
and December 31, 1995, as filed with the Commission, (ii) proxy statements
related to all meetings of its stockholders (whether annual or special) since
January 1, 1994, and (iii) all other reports or registration statements filed by
Parent with the Commission under the Exchange Act since December 31, 1992
through the date hereof, except Quarterly Reports on Form 10-Q for fiscal
quarters ended prior to December 31, 1995 (the items in clauses (i) through
(iii) being referred to herein collectively as the "Parent SEC Reports"). As of
their respective dates, the Parent SEC Reports complied in all material respects
with the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder applicable to such Parent SEC Reports. As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Parent included in the
Parent SEC Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto. The financial statements included in the Parent
SEC Reports: have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto); present fairly, in all material respects, the financial
position of Parent and its subsidiaries as at the dates thereof and the results
of their operations and cash flows for the periods then ended subject, in the
case of the unaudited interim financial statements, to normal year-end audit
adjustments, any other
<PAGE>12
adjustments described therein and the fact that certain
information and notes have been condensed or omitted in accordance with the
Exchange Act and the rules promulgated thereunder; and are in all material
respects, in accordance with the books of account and records of Parent.
Section 3.6 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports or as disclosed in Section 4.6 of the Parent
Disclosure Letter, from December 31, 1995 through the date of this Agreement,
there has not been (i) any transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) individually or in the aggregate having a Parent
Material Adverse Effect (other than as a result of changes in laws or
regulations of general applicability); (ii) any damage, destruction or loss,
whether or not covered by insurance, which would have a Parent Material Adverse
Effect; or (iii) any entry into any commitment or transaction material to Parent
and its subsidiaries taken as a whole (including, without limitation, any
borrowing or sale of assets) except in the ordinary course of business
consistent with past practice.
Article IV.
ADJUSTMENTS
Section 4.1. Distributions; Adjustment upon Changes in
Capitalization.
(a) Any dividends or other distributions (whether payable in
cash, stock or otherwise) by the Company with respect to any Shares
purchased hereunder with a record date on or after the Closing Date
will belong to Parent. If any such dividend or distribution belonging
to Parent is paid by the Company to the Stockholder, the Stockholder
shall hold such dividend or distribution in trust for the benefit of
Parent and shall promptly remit such dividend or distribution to Parent
in exactly the form received, accompanied by appropriate instruments of
transfer.
(b) If on or after the date of this Agreement there shall
occur any stock dividend, stock split, recapitalization, combination or
exchange of shares, merger, consolidation, reorganization or other
change or transaction of or by the Company, as a result of which shares
of any class of stock, other securities, cash or other property shall
be issued in respect of any Shares or if any Shares shall be changed
into the same or another class of stock or other securities, then, upon
exercise of the Option, Parent shall receive for the aggregate price
payable upon exercise of the Option with respect to the Shares, all
such shares of stock, other securities, cash or other property issued,
delivered or received with respect to such Shares (or if the Option
shall not be exercised, appropriate adjustment shall
<PAGE>13
be made for purposes of the calculations set forth in this
Agreement).
Article V.
Section 5.1. No Solicitation of Transactions.
Each Stockholder covenants and agrees that in its capacity as
a stockholder of the Company it shall not, directly or indirectly, take (nor
shall the Stockholder authorize or permit its officers, directors, partners,
stockholders, employees, representatives, investment bankers, attorneys,
accountants or other agents or affiliates (the "Representatives"), to take and
the Representatives shall not take, on behalf of the Stockholder) any action to
(i) encourage, solicit or initiate the submission of any Acquisition Proposal or
a proposal for the acquisition, purchase or option to purchase any of the
Shares, (ii) enter into any agreement with respect to any Acquisition Proposal
or any acquisition or purchase of all or any of the Shares or (iii) participate
in any way in discussions or negotiations with, or furnish any information to,
any person in connection with, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal or a proposal to acquire or
purchase any of the Shares. The Stockholder will promptly communicate to Parent
any solicitation received by it in its capacity as a stockholder of the Company
with respect to an Acquisition Proposal and the terms of such proposal or
inquiry, including the identity of the person and its affiliates making the
same, that it may receive in respect of any such transaction, or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with it. "Acquisition Proposal" shall mean any proposed
(A) merger, consolidation or similar transaction involving the Company, (B)
sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of assets of the Company or its
subsidiaries representing 10% or more of the consolidated assets of the Company
and its subsidiaries other than in the ordinary course of business, (C) issue,
sale, or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or warrants
to purchase, or securities convertible into or exchangeable for, such
securities) representing 10% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 25% or more of the outstanding Common Stock.
<PAGE>14
Article VI.
Covenants of the Stockholders.
Section 6.1. Negative Covenants. Each Stockholder agrees,
until the Option has terminated, not to:
(a) sell, transfer, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement with respect to
the sale, transfer, pledge, assignment or other disposition of, the
Shares owned by such Stockholder to any person other than Parent or
Parent's designee and except as contemplated in Exhibit A;
(b) acquire any additional shares of Common Stock without the
prior consent of Parent other than pursuant to rights under the Company
Employees Stock Purchase Plan or options outstanding on the date of
this Agreement; or
(c) deposit any Shares into a voting trust or grant a proxy or
enter into a voting agreement with respect to any Shares, except for
this Agreement.
Section 6.2. Further Assurances. If Parent shall exercise the
Option in accordance with the terms of this Agreement, from time to time and
without additional consideration the Stockholder will execute and deliver, or
cause to be executed and delivered, such additional or further transfers,
assignments, endorsements, consents and other instruments as Parent may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement, including the transfer of the Shares to Parent
and the release of any and all Encumbrances with respect thereto.
Article VII.
MISCELLANEOUS
Section 7.1. Non-Survival of Representations, Warranties and
Agreements. All representations, warranties and agreements made by the parties
to this Agreement shall terminate at the Closing.
Section 7.2. Expenses. Except as otherwise provided herein,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such costs and expenses.
Section 7.3. Notices. All notices or other communications
under this Agreement shall be in writing and shall be given by delivery in
person, by facsimile, cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows (or such other address for a
<PAGE>15
party as shall be specified in a notice given in accordance
with this Section 6.3) and shall be deemed to have been given one business day
after transmission by facsimile, cable, telegram, telex of other standard form
of telecommunications or four days after deposit in the U.S. mail:
If to a Stockholder, at the address or facsimile number of such
Stockholder set forth on Exhibit A, with a copy to:
UUNET Technologies, Inc.
3060 Williams Drive
Fairfax, VA 22031
Attention: General Counsel
Facsimile No.: (703) 206-5807
and
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, CA 94301
Attn: August J. Moretti
and Richard Friedman
Facsimile: (415) 324-0638
If to Parent or Sub:
MFS Communications Company, Inc.
3555 Farnam Street, 2nd Floor
Omaha, Nebraska 68131
Attention: General Counsel
Facsimile No.: (402) 977-5335
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: John S. D'Alimonte, Esq.
Facsimile No.: (212) 821-8111
Section 7.4. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 7.5. Entire Agreement. This Agreement and any
documents delivered by the parties in connection herewith
<PAGE>16
constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
Section 7.6. Assignment, Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, except that Parent or
Sub may assign all or any of their rights and obligations hereunder to any
affiliate of Parent, provided that no such assignment shall relieve Parent or
Sub of its obligations hereunder if such assignee does not perform such
obligations. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
Section 7.7. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 7.8. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to its rules of conflict of laws.
Section 7.9. Headings. Headings of the Articles and
Sections of this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
<PAGE>17
Section 7.10. Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
[Signature Pages follow.]
<PAGE>18
IN WITNESS WHEREOF, Parent has caused this Agreement to be
executed by its officers thereunto duly authorized and each Stockholder has
caused this Agreement to be executed, or duly executed by an authorized
signatory, all as of the date first written above.
MFS COMMUNICATIONS COMPANY, INC.
By /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman & CEO
MFS GLOBAL INTERNET SERVICES, INC.
By /s/ James Q. Crowe
Name: James Q. Crowe
Title: President
[Entity Stockholder]
By
Name:
Title:
[Individual Stockholder]
<PAGE>19
Exhibit A
List of Stockholders
Name and address Number of Shares
of Stockholder of Common Stock
Richard L. Adams, Jr. 4,700,000(1)
c/o UUNET Technologies, Inc.
3060 Williams Drive
Fairfax, VA 22031
Facsimile: (703) 206-5805
Microsoft Corporation 4,164,000
1 Microsoft Way
Redmond, WA 98052
Attn: Robert Eschelman
Facsimile: (206) 869-1327
Menlo Ventures IV, L.P. 2,563,031
Menlo Evergreen V, L.P. 666,667
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Attn: John W. Jarve
Facsimile: (415) 854-7059
John W. Sidgmore 1,091,455(2)
c/o UUNET Technologies, Inc.
3060 Williams Drive
Fairfax, VA 22031
Facsimile: (703) 206-5805
New Enterprise Associates V, 3,229,698
Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202
Attn: Peter J. Barris and
Nancy Dorman
Facsimile: (410) 752-7721
Accel IV L.P. 2,958,403
Accel Investors '93 L.P. 119,499
One Palmer Square
Princeton, NJ 08542
Attn: Carter Sednaoui
Facsimile: (609) 683-0384
<PAGE>20
Les B. Straus 53,472
PictureTel
The Tower at Northwoods
222 Rosewood Drive
Danvers, MA 01923
Facsimile: (508) 762-5219
Daniel C. Lynch 34,500
25560 La Lanne Court
Los Altos Hills, CA 94022
Facsimile: (415) 948-0757 __________
TOTAL 19,580,725
- ---------------------
(1) Of the 4,700,000 shares held by Mr. Adams, 325,000 shares may be sold,
gifted or otherwise transferred without restriction under this
Agreement prior to the Closing.
(2) Of the 1,091,455 shares held by Mr. Sidgmore, 355,458 of such shares
are subject to a right of repurchase by the Company if Mr. Sidgmore
voluntarily terminates his employment with the Company before June 27,
1996. In addition, as of April 30, 1996, the Company has a right of
repurchase with respect to another 562,807 of such shares in the event
that Mr. Sidgmore's employment with the Company is terminated and which
right of repurchase expires with respect to 14,810.70 shares of the
last day of each calendar month so long as Mr. Sidgmore remains
employed by the Company; provided, that such right of repurchase
expires with respect to 50 percent of such shares subject to a right of
repurchase in the event of a Change in Control or involuntary
Termination Other Than For Cause (each, as defined in the Nonstatutory
Stock Option Agreement between the Company and Mr. Sidgmore dated as of
July 20, 1994).
<PAGE>1
Conformed Copy
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
APRIL 29, 1996
AMONG
MFS COMMUNICATIONS COMPANY, INC.
MFS GLOBAL INTERNET SERVICES, INC.
AND
UUNET TECHNOLOGIES, INC.
<PAGE>2
TABLE OF CONTENTS
ARTICLE I. THE MERGER....................................................2
Section 1.1. The Merger.........................................2
Section 1.2. Effective Date of the Merger.......................2
ARTICLE II. THE SURVIVING CORPORATION....................................2
Section 2.1. Certificate of Incorporation.......................2
Section 2.2. By-Laws............................................2
Section 2.3. Board of Directors; Officers.......................2
Section 2.4. Effects of Merger..................................3
ARTICLE III. CONVERSION OF SHARES........................................3
Section 3.1. Exchange Ratio.....................................3
Section 3.2. Parent to Make Certificates Available..............3
Section 3.3. Dividends; Transfer Taxes..........................5
Section 3.4. No Fractional Shares...............................5
Section 3.5. Stock Options......................................6
Section 3.6. Stockholders' Meetings.............................7
Section 3.7. Closing of the Company's Transfer Books............8
Section 3.8. Assistance in Consummation of the Merger...........8
Section 3.9. Closing............................................9
Section 3.10. No Further Rights in Company Common Stock.........9
Section 3.11. No Liability......................................9
Section 3.12. Withholding Rights................................9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT.....................9
Section 4.1. Organization and Qualification.....................9
Section 4.2. Capitalization.....................................10
Section 4.3. Subsidiaries.......................................10
Section 4.4. Authority Relative to this Merger Agreement........11
Section 4.5. Reports and Financial Statements...................12
Section 4.6. Absence of Certain Changes or Events...............13
Section 4.7. Employee Benefit Plans.............................13
Section 4.8. ERISA..............................................14
Section 4.9. Parent Action......................................15
Section 4.10. Fairness Opinion..................................15
Section 4.11. No Brokers........................................15
Section 4.12. Parent Ownership of Company Common Stock..........15
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................15
Section 5.1. Organization and Qualification.....................15
Section 5.2. Capitalization.....................................16
Section 5.3. Subsidiaries.......................................16
Section 5.4. Authority Relative to this Merger Agreement........17
<PAGE>3
Section 5.5. Reports and Financial Statements.....................18
Section 5.6. Absence of Certain Changes or Events.................19
Section 5.7. Employee Benefit Plans...............................19
Section 5.8. ERISA................................................20
Section 5.9. Takeover Provisions Inapplicable.....................20
Section 5.10. Company Action......................................21
Section 5.11. Fairness Opinion....................................21
Section 5.12. No Brokers..........................................21
ARTICLE VI. REPRESENTATIONS AND WARRANTIES REGARDING SUB...................21
Section 6.1. Organization.........................................21
Section 6.2. Capitalization.......................................21
Section 6.3. Authority Relative to this Merger Agreement..........22
ARTICLE VII. CONDUCT OF BUSINESS PENDING THE MERGER........................22
Section 7.1. Conduct of Business by the Company Pending the
Merger...............................................22
Section 7.2. Conduct of Business by Parent Pending the Merger.....26
Section 7.3. Conduct of Business of Sub...........................26
Section 7.4. Notice of Breach.....................................26
ARTICLE VIII. ADDITIONAL AGREEMENTS........................................26
Section 8.1. Access and Information...............................26
Section 8.2. Registration Statement/Proxy Statement...............27
Section 8.3. Compliance with the Securities Act...................28
Section 8.4. Listing..............................................28
Section 8.5. Indemnification......................................28
Section 8.6. HSR Act..............................................31
Section 8.7. Additional Agreements................................31
Section 8.8. No Solicitation......................................32
Section 8.9. Limitation on Acquisition Activities.................33
Section 8.10. Notice of Actions...................................33
Section 8.11. Benefit Plans Generally.............................33
Section 8.12. Stockholders' Rights Plan...........................34
ARTICLE IX. CONDITIONS PRECEDENT...........................................34
Section 9.1. Conditions to Each Party's Obligation to Effect the
Merger...............................................34
Section 9.2. Conditions to Obligation of the Company to Effect
the Merger...........................................35
Section 9.3. Conditions to Obligations of Parent and Sub to Effect
the Merger...........................................35
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER...............................36
Section 10.1. Termination.........................................36
Section 10.2. Effect of Termination...............................38
<PAGE>4
Section 10.3. Amendment...........................................38
Section 10.4. Extension; Waivers..................................38
ARTICLE XI. GENERAL PROVISIONS.............................................38
Section 11.1. Non-Survival of Representations, Warranties and
Agreements..........................................38
Section 11.2. Notices.............................................39
Section 11.3. Fees and Expenses...................................40
Section 11.4. Publicity...........................................41
Section 11.5. Specific Performance................................41
Section 11.6. Assignment; Binding Effect..........................42
Section 11.7. Entire Agreement....................................42
Section 11.8. Governing Law.......................................42
Section 11.9. Counterparts........................................42
Section 11.10. Headings, Table of Contents, Index of Defined
Terms..............................................42
Section 11.11. Interpretation.....................................42
Section 11.12. Waivers............................................43
Section 11.13. Severability.......................................43
Section 11.14. Subsidiaries.......................................43
Exhibit 1.1(a) - The Stock Option Agreement Exhibit 1.1(b) - The Parent Voting
Agreement
Exhibit 8.3(a) - The Affiliate Letter
<PAGE>5
Index of Defined Terms
Acquisition Proposal........................................................32
Affiliate...................................................................28
Certificates.................................................................4
Claim.......................................................................30
Code.........................................................................1
Commission..................................................................10
Company......................................................................1
Company Benefit Plans.......................................................19
Company Common Stock.........................................................3
Company Disclosure Letter...................................................16
Company ERISA Affiliate.....................................................20
Company Material Adverse Effect.............................................15
Company Meeting..............................................................8
Company SEC Reports.........................................................18
DGCL.........................................................................3
Effective Date...............................................................2
Encumbrances................................................................10
ERISA.......................................................................13
Excess Shares................................................................6
Exchange Act................................................................12
Exchange Agent...............................................................3
Exchange Fund................................................................4
Exchange Ratio...............................................................3
Form S-4....................................................................27
Fractional Securities Fund...................................................6
HSR Act.....................................................................12
Indemnified Party...........................................................29
IRS.........................................................................14
Merger.......................................................................1
Merger Agreement.............................................................1
MS 17
MS Agreement................................................................17
Nasdaq.......................................................................6
Options.....................................................................16
Outstanding Options..........................................................6
Parent.......................................................................1
Parent Benefit Plans........................................................14
Parent Common Stock..........................................................3
Parent Disclosure Letter....................................................10
Parent ERISA Affiliate......................................................14
Parent Material Adverse Effect..............................................10
<PAGE>6
Parent Meeting...............................................................8
Parent Rights Plan...........................................................3
Parent SEC Reports..........................................................12
Parent Share Proposal........................................................8
Parent Stock Split...........................................................3
Parent Voting Agreement......................................................1
Parent Voting Debt..........................................................10
Permitted Options...........................................................23
Proposed Transactions.......................................................16
Proxy Statement/Prospectus..................................................27
Purchase Event..............................................................37
Securities Act..............................................................12
Share Consideration..........................................................4
Significant Subsidiaries....................................................10
Stock Option Agreement.......................................................1
Stock Option Plans...........................................................6
Stock Purchase Plan..........................................................7
Sub..........................................................................1
Surviving Corporation........................................................2
Voting Debt.................................................................16
<PAGE>7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger
Agreement"), dated as of April 29, 1996, by and among MFS COMMUNICATIONS
COMPANY, INC., a Delaware corporation ("Parent"), MFS GLOBAL INTERNET
SERVICES, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and UUNET TECHNOLOGIES, INC., a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Parent and the Company desire to effect a business
combination (the "Merger") by means of the merger of Sub with and into the
Company;
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved the Merger, upon the terms and subject to the conditions
set forth herein;
WHEREAS, as a condition and inducement to Parent's and Sub's
entering into this Merger Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Merger Agreement,
Parent is entering into a Stockholder Option, Voting and Proxy Agreement with
certain stockholders of the Company, in the form of Exhibit 1.1(a) (the "Stock
Option Agreement"), pursuant to which, among other things, such stockholders
have agreed to grant Parent the irrevocable option to purchase the shares of
Company Common Stock owned by such stockholders; and agreed to vote the shares
of Company Common Stock (as defined below) owned by such stockholders in favor
of the Merger provided for herein and to grant Parent irrevocable proxies to
vote such shares of Company Common Stock;
WHEREAS, as a condition and inducement to the Company's
entering into this Merger Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Merger Agreement,
the Company is entering into a Parent Voting and Proxy Agreement with certain
stockholders of Parent, in the form of Exhibit 1.1(b) (the "Parent Voting
Agreement"), pursuant to which, among other things, such stockholders have
agreed to vote the shares of Parent Common Stock (as defined below) owned by
such stockholders in favor of the Parent Share Proposal (as defined below)
provided for herein and to grant the Company irrevocable proxies to vote such
shares of Parent Common Stock;
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within
<PAGE>8
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the
conditions hereof, on the Effective Date (as defined in Section 1.2), Sub shall
be merged with and into the Company and the separate existence of Sub shall
thereupon cease, and the Company, as the surviving corporation in the Merger
(the "Surviving Corporation"), shall by virtue of the Merger continue its
corporate existence under the laws of the State of Delaware.
Section 1.2. Effective Date of the Merger. The Merger shall
become effective at the date and time (the "Effective Date") when a properly
executed Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware, which filing shall be made as soon as practicable following
fulfillment of the conditions set forth in Article IX hereof, or at such time
thereafter as is provided in such Certificate.
ARTICLE II.
THE SURVIVING CORPORATION
Section 2.1. Certificate of Incorporation. Subject to Section
8.5 of this Merger Agreement, after the Effective Date, the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read as the Certificate of Incorporation of Sub as in effect
immediately prior to the Effective Date, except that Article One shall be
amended to read as follows: "The name of the Corporation is UUNET TECHNOLOGIES,
INC."
Section 2.2. By-Laws. Subject to Section 8.5 of this Merger
Agreement, after the Effective Date, the By-laws of Sub, as in effect
immediately prior to the Effective Date, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
<PAGE>9
Section 2.3. Board of Directors; Officers. The directors of
Sub immediately prior to the Effective Date and John W. Sidgmore shall be the
directors of the Surviving Corporation and the officers of the Company
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
Section 2.4. Effects of Merger. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law (the
"DGCL").
ARTICLE III.
CONVERSION OF SHARES
Section 3.1. Exchange Ratio. On the Effective Date, by
virtue of the Merger and without any action on the part of any holder of any
common stock, $0.001 par value, of the Company ("Company Common Stock"):
(a) All shares of Company Common Stock which are held by the
Company or any subsidiary of the Company, and any shares of Company
Common Stock owned by Parent, Sub or any other subsidiary of Parent,
shall be canceled.
(b) Subject to Section 3.4, each remaining outstanding share
of Company Common Stock shall be converted into and represent the right
to receive 1.777776, subject to adjustment pursuant to Section 3.1(c)
(as may be adjusted, the "Exchange Ratio") fully paid and nonassessable
shares of the common stock, $.01 par value, of Parent (the "Parent
Common Stock"), which reflects the stock split of the Parent Common
Stock that was paid on April 26, 1996 (the "Parent Stock Split"),
together with the associated rights under Parent's Rights Agreement,
dated as of September 30, 1995, between Parent and Continental Stock
Transfer & Trust Company (the "Parent Rights Plan").
(c) In the event of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares
with respect to, or rights issued in respect of, Parent Common Stock
other than the Parent Stock Split after the date hereof, the Exchange
Ratio shall be adjusted accordingly.
<PAGE>10
(d) Each issued and outstanding share of capital stock of Sub
shall be converted into and become one fully paid and nonassessable
share of Common Stock, $.01 par value, of the Surviving Corporation.
Section 3.2. Parent to Make Certificates Available.
(a) Prior to the Effective Date, Parent shall appoint
Continental Stock Transfer and Trust Company to act as exchange agent
(the "Exchange Agent") for the Merger. At the Effective Date, Parent
shall deposit with the Exchange Agent, for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this
Article III, through the Exchange Agent, certificates representing a
number of shares of Parent Common Stock equal to the product (rounded
down to the nearest whole number) of the Exchange Ratio multiplied by
the number of shares of Company Common Stock outstanding immediately
prior to the Effective Date. For purposes of the Merger Agreement,
shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, are hereinafter referred to as the
"Exchange Fund" and such shares of Parent Common Stock, is hereinafter
referred to as the "Share Consideration." The Exchange Agent shall
deliver the Share Consideration out of the Exchange Fund as directed by
Parent. The Share Consideration shall be deemed to have been issued on
the Effective Date.
(b) On the Effective Date, Parent shall instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Date represented outstanding
shares of Company Common Stock (collectively, the "Certificates") whose
shares were converted into the right to receive the Share Consideration
pursuant to Section 3.1(b) within three business days of receiving from
the Company a list of such holders of record, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Share
Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as reasonably may be required by the
Exchange
<PAGE>11
Agent, and acceptance thereof by the Exchange Agent, each
holder of a Certificate shall be entitled to receive in exchange
therefor certificates representing the Share Consideration that such
holder has the right to receive pursuant to the provisions of this
Article III, and the Certificate so surrendered shall forthwith be
canceled. The Exchange Agent shall accept such Certificates upon
compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. Subject to applicable law, following
surrender of any such Certificate, there shall be paid to the record
holder thereof the certificates representing the Share Consideration
and cash in consideration of fractional shares as provided in Section
3.4.
(c) Any portion of the Exchange Fund and the Fractional
Securities Fund (as defined below) that remains undistributed to the
former stockholders of the Company for 12 months after the Effective
Date shall be delivered to Parent upon demand. Any holder of shares of
Company Common Stock who has not exchanged his shares for Parent Common
Stock in accordance with subsection (a) within 12 months after the
Effective Date shall have no further claim upon the Exchange Agent and
shall thereafter look only to Parent for payment in respect of his
shares of Company Common Stock. Until so surrendered, certificates
representing Company Common Stock shall represent solely the right to
receive the Share Consideration.
(d) Notwithstanding paragraph (b) above, all shares of Company
Common Stock subject to a right of repurchase which remains in effect
following the Merger shall continue to bear a restrictive legend with
respect to such right of repurchase and shall be delivered to Parent to
hold, pending the lapse of the right of repurchase.
Section 3.3. Dividends; Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock will be paid to
persons entitled to receive certificates representing Parent Common Stock
pursuant to this Merger Agreement until such persons surrender their
Certificates representing Company Common Stock. Upon such surrender, there shall
be paid to the person in whose name the certificates representing such Parent
Common Stock shall be issued any dividends or other distributions which shall
have become payable with respect to such Parent Common Stock in respect of a
record date after the Effective Date. In no event shall the person entitled to
receive such dividends be entitled to receive interest on such dividends. In the
event that any certificates for any shares of Parent Common Stock are to be
issued in a name other than that in which the Certificates representing shares
of
<PAGE>12
Company Common Stock surrendered in exchange therefor are
registered, it shall be a condition of such exchange that the Certificate or
Certificates so surrendered shall be properly endorsed or be otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of Parent Common Stock in a name other than that of
the registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
Section 3.4. No Fractional Shares. No certificates or scrip
representing less than one share of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates representing Company Common Stock
pursuant to Section 3.1(b). In lieu of any such fractional share, each holder of
Company Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange
pursuant to Section 3.1(b) shall be paid upon such surrender cash (without
interest) in an amount equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional Parent Common Stock
issued pursuant to this Section 3.4. As soon as practicable following the
Effective Date, the Exchange Agent shall determine the excess of (i) the number
of full shares of Parent Common Stock delivered to the Exchange Agent by Parent
over (ii) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being herein called
the "Excess Shares"), and the Exchange Agent, as agent for the former holders of
Company Common Stock, shall sell the Excess Shares at the prevailing prices on
The Nasdaq Stock Market("Nasdaq"). The Exchange Agent shall deduct from the
proceeds of the sale of the Excess Shares all commissions and transfer taxes
incurred in connection with such sale of Excess Shares. Until the net proceeds
of such sale have been distributed to the former stockholders of the Company,
the Exchange Agent will hold such proceeds in trust for such former stockholders
(the "Fractional Securities Fund"). As soon as practicable after the
determination of the amount of cash to be paid to former stockholders of the
Company in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with the terms of this Merger Agreement such amounts to
such former stockholders.
Section 3.5. Stock Options. At or prior to the Effective
Date, the Company and Parent shall take all action necessary to cause the
assumption by Parent as of the Effective Date of the Company's 1995 Performance
Option Plan, Incentive Stock Option Plan, Equity
<PAGE>13
Incentive Plan and Nonemployee Directors Stock Option Plan
(the "Stock Option Plans"). Each of the options to purchase Company Common
Stock, whether vested or unvested, issued under the Stock Option Plans or
pursuant to separate option agreements outstanding as of the Effective Date (the
"Outstanding Options") shall be converted without any action on the part of the
holder thereof into an option to purchase shares of Parent Common Stock as of
the Effective Date. The number of shares of Parent Common Stock that the holder
of an Outstanding Option shall be entitled to receive upon the exercise of such
option shall be a number of whole shares determined by multiplying the number of
shares of Company Common Stock subject to such option, determined immediately
before the Effective Date, by the Exchange Ratio. The option price of each share
of Parent Common Stock subject to an Outstanding Option shall be the amount
(rounded up to the nearest whole cent) obtained by dividing the exercise price
per share of Company Common Stock at which such option is exercisable
immediately before the Effective Date by the Exchange Ratio. The assumption and
substitution of options as provided herein shall not give the holders of such
options additional benefits or additional vesting rights (other than rights to
the acceleration of vesting or the lapse of the right of repurchase caused by
the Merger under existing contractual arrangements) which they did not have
immediately prior to the Effective Date or relieve the holders of any
obligations or restrictions applicable to their options or the shares obtainable
upon exercise of the options. After the Effective Date, the Stock Option Plans
shall be continued in effect by Parent subject to amendment, modification,
suspension, abandonment or termination as provided therein, and the Stock Option
Plans as so continued shall relate only to the issuance of Parent Common Stock
as provided in this Section 3.5. Parent shall comply with the terms of the Stock
Option Plans and use all reasonable efforts to ensure, to the extent required
by, and subject to the provisions of such Stock Option Plans, that the
Outstanding Options which qualified as incentive stock options prior to the
Effective Date continue to qualify as incentive stock options after the
Effective Date. Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery under
Outstanding Options assumed in accordance with this Section 3.5. As soon as
practicable after the Effective Date, and not more than one business day
thereafter, Parent shall file a registration statement on Form S-8 relating to
such assumed options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such options
remain outstanding. Parent shall use all reasonable efforts to qualify as soon
as practicable after the Effective Date under applicable state securities laws
the issuance of such shares of Parent Common Stock issuable upon exercise of
such Outstanding Options. With respect to those individuals who subsequent to
the Merger will be
<PAGE>14
subject to the reporting requirements under Section 16(a) of
the Exchange Act, Parent shall administer the Stock Option Plans assumed
pursuant to this Section 3.5 in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the Stock Option Plans complied
with such rule prior to the Merger. Upon the earlier to occur of (i) July 31,
1996 or (ii) the trading day immediately preceding the Effective Date, all then
outstanding rights to acquire shares of Company Common Stock under the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan") will be exercised for
the purchase of shares of Company Common Stock. Effective no later than the
close of the second trading day immediately preceding the Effective Date, (but
in no event prior to the exercise contemplated in the previous sentence), the
Board of Directors of the Company shall terminate the Stock Purchase Plan and
all outstanding options to purchase Company Common Stock thereunder. All funds
contributed to the Stock Purchase Plan that have not been used to purchase
shares of Company Common Stock shall be returned, in cash, to participants of
the Stock Purchase Plan as soon as administratively feasible after such
termination date, in accordance with Section 17(b) of the Stock Purchase Plan.
Section 3.6. Stockholders' Meetings.
(a) The Company shall take all action necessary, in accordance
with applicable law and its Certificate of Incorporation and By-laws,
to convene a special meeting of the holders of Company Common Stock
(the "Company Meeting") as promptly as practicable for the purpose of
considering and taking action upon this Merger Agreement. The Board of
Directors of the Company will recommend that holders of Company Common
Stock vote in favor of and approve the Merger and the adoption of the
Merger Agreement at the Company Meeting. The Company shall use all
reasonable efforts to solicit from its stockholders proxies in favor of
the adoption of the Merger Agreement and shall take all other action
necessary or advisable to secure the vote or consent of stockholders
required by Delaware law to obtain such approval. At the Company
Meeting, all of the shares of Company Common Stock then owned by
Parent, Sub, or any other subsidiary of Parent, or with respect to
which Parent, Sub, or any other subsidiary of Parent holds the power to
direct the voting, will be voted in favor of approval of the Merger and
adoption of this Merger Agreement.
(b) Parent shall take all action necessary, in accordance with
applicable law and its Certificate of Incorporation and By-laws, to
convene a special meeting of the holders of Parent capital stock (the
"Parent Meeting") as promptly as practicable for the purpose of
considering and taking action to authorize the issuance of Parent
Common Stock associated with the Merger under the applicable guidelines
of Nasdaq (the "Parent Share Proposal"). The Board of Directors of
Parent will recommend that holders of Parent Common Stock vote in favor
of and approve the Parent Share Proposal at the Parent Meeting. Parent
shall use all reasonable efforts to solicit from its stockholders
proxies in favor of the adoption of the Parent Share Proposal and shall
take all other action necessary or advisable to secure the vote or
consent of stockholders required by Delaware law to obtain such
approval.
<PAGE>15
Section 3.7. Closing of the Company's Transfer Books. At the
Effective Date, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall be made thereafter. In the
event that, after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for Parent Common
Stock and/or cash as provided in Sections 3.1(b) and 3.4.
Section 3.8. Assistance in Consummation of the Merger. Each of
Parent, Sub and the Company shall provide all reasonable assistance to, and
shall cooperate with, each other to bring about the consummation of the Merger
as soon as possible in accordance with the terms and conditions of this Merger
Agreement. Parent shall cause Sub to perform all of its obligations in
connection with this Merger Agreement.
Section 3.9. Closing. The closing of the transactions
contemplated by this Merger Agreement shall take place (i) at the offices of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, as soon as practicable after the last of the conditions set
forth in Article IX is fulfilled or waived or (ii) at such other time and place
as Parent and the Company shall agree in writing.
Section 3.10. No Further Rights in Company Common Stock. All
shares of Parent Common Stock issued upon conversion of the shares of Company
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Sections 3.3 or 3.4) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
Section 3.11. No Liability. Neither Parent nor the Company
shall
<PAGE>16
be liable to any holder of shares of Company Common Stock for
any such shares of Company Common Stock (or dividends or distributions with
respect hereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law, rule, regulation, statute, order,
judgment or decree.
Section 3.12. Withholding Rights. Each of Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Merger Agreement to any holder
of shares of Company Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Merger Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 4.1. Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on its business as
it is now being conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary, except
where the failure to be so qualified will not, individually or in the aggregate,
have a material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities or operations of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect"). Complete and
correct copies as of the date hereof of the Certificate of Incorporation and
By-laws of Parent have been delivered to the Company as part of a disclosure
letter delivered by Parent to the Company prior to the date of this Merger
Agreement (the "Parent Disclosure Letter").
Section 4.2. Capitalization. The authorized capital stock of
<PAGE>17
Parent consists of 400,000,000 shares of Parent Common Stock,
and 25,000,000 shares of preferred stock, $.01 par value. As of April 26, 1996,
as adjusted for the Parent Stock Split (i) 125,804,234 shares of Parent Common
Stock were validly issued and outstanding, fully paid and nonassessable, (ii)
95,000 shares of Parent's Series A 8% Cumulative Convertible Preferred Stock,
were validly issued and outstanding, fully paid, and nonassessable and (iii)
15,000,000 shares of Series B Cumulative Convertible Preferred Stock were
validly issued and outstanding, fully paid, and nonassessable. As of the date
hereof, there are no bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which the Parent's stockholders may vote
("Parent Voting Debt") issued or outstanding. As of April 26, 1996, after giving
effect to the Parent Stock Split, except for options to acquire 20,614,274
shares of Parent Common Stock pursuant to the Parent's 1992 Stock Plan and 1993
Stock Plan, warrants to purchase 1,500,000 shares of Parent Common Stock,
commitments to issue shares of Parent Common Stock under Parent's Shareworks and
Shareworks Plus programs and commitments to issue shares of Parent Common Stock
to non-employee directors pursuant to Parent's 1993 Stock Plan, and, except as
provided herein and in the Parent Rights Plan, there are no options, warrants,
calls or other rights, agreements or commitments presently outstanding
obligating Parent to issue, deliver or sell shares of its capital stock or debt
securities, or obligating Parent to grant, extend or enter into any such option,
warrant, call or other such right, agreement or commitment. All of the shares of
Parent Common Stock issuable in accordance with this Merger Agreement in
exchange for Company Common Stock at the Effective Date will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and shall be
delivered free and clear of any pledge, lien, security interest, mortgage,
charge, claim, equity, option, proxy, voting restriction, right of first
refusal, limitation on disposition, adverse claim of ownership or use or
encumbrance of any kind ("Encumbrances"), including any preemptive rights of any
stockholder of Parent.
Section 4.3. Subsidiaries. The only "Significant Subsidiaries"
(as such term is defined in Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "Commission")) ("Significant Subsidiaries") of Parent
are those named in Section 4.3 of the Parent Disclosure Letter or set forth on
Exhibit 21 to Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. Each Significant Subsidiary incorporated in the United States
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the corporate power to carry
on its business as it is now being conducted or currently proposed to be
conducted. Each Significant Subsidiary is duly qualified as a foreign
corporation
<PAGE>18
to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary except where the failure to be
so qualified will not have a Parent Material Adverse Effect. Except as disclosed
in Section 4.3 of the Parent Disclosure Letter, all the outstanding shares of
capital stock of each Significant Subsidiary are validly issued, fully paid and
nonassessable and owned by Parent or by a Significant Subsidiary of Parent free
and clear of any Encumbrances. There are no existing options, warrants, calls or
other rights, agreements or commitments of any character relating to the issued
or unissued capital stock or other securities of any of the Significant
Subsidiaries of Parent. Except as set forth in the Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, as disclosed in Section
4.3 of the Parent Disclosure Letter and except for wholly owned subsidiaries
which are formed after the date hereof in the ordinary course of business,
Parent does not directly or indirectly own any interest in any other
corporation, partnership, joint venture or other business association or entity
that is a Significant Subsidiary.
Section 4.4. Authority Relative to this Merger Agreement.
(a) Parent has the corporate power to execute and deliver this
Merger Agreement and to carry out its obligations hereunder. The
execution and delivery of this Merger Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
Parent's Board of Directors. The Merger Agreement constitutes a valid
and binding obligation of Parent, enforceable against Parent in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be
brought. Except for the approval of the holders of the Parent capital
stock described in Section 3.6(b), no other corporate proceedings on
the part of Parent are necessary to authorize the execution and
delivery by Parent of this Merger Agreement or the consummation of the
transactions contemplated hereby.
(b) The execution and delivery of this Merger Agreement and
the consummation of the transactions contemplated hereby, does not and
will not result in the change in conversion ratios, conversion rights
or voting rights, or the breach, violation, default (with or without
notice or lapse of time, or both), termination, cancellation or
acceleration of any obligation or the loss of a material benefit, under
(i) the Parent's charter or by-laws or (ii)
<PAGE>19
any indenture or other loan document provision or other
contract, license, franchise, permit, order, decree, concession, lease,
instrument, judgment, statute, law, ordinance, rule or regulation
applicable to Parent or any of its subsidiaries or their respective
properties or assets, other than, in the case of clause (ii) only, (A)
any breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate, will
not have a Parent Material Adverse Effect or prevent the consummation
of the transactions contemplated hereby and (B) the laws and
regulations referred to in the next paragraph.
(c) Except as disclosed in Section 4.4 of the Parent
Disclosure Letter, or in connection, or in compliance, with the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934 (the "Exchange
Act"), and the corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Parent of the Merger or the other
transactions contemplated by this Merger Agreement, other than filings,
registrations, authorizations, consents or approvals the failure of
which to make or obtain will not have a Parent Material Adverse Effect
or prevent the consummation of the transactions contemplated hereby.
Section 4.5. Reports and Financial Statements. Parent has
previously furnished the Company with true and complete copies of its (i) Annual
Report on Form 10-K, as amended, for the fiscal years ended December 31, 1994
and December 31, 1995, as filed with the Commission, (ii) proxy statements
related to all meetings of its stockholders (whether annual or special) since
January 1, 1994, and (iii) all other reports or registration statements filed by
Parent with the Commission under the Exchange Act since December 31, 1992
through the date hereof, except Quarterly Reports on Form 10-Q for fiscal
quarters ended prior to December 31, 1995 (the items in clauses (i) through
(iii) being referred to herein collectively as the "Parent SEC Reports"). As of
their respective dates, the Parent SEC Reports complied in all material respects
with the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder applicable to such Parent SEC Reports. As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
<PAGE>20
circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of Parent included in the Parent SEC Reports comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto. The financial
statements included in the Parent SEC Reports: have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto); present fairly, in
all material respects, the financial position of Parent and its subsidiaries as
at the dates thereof and the results of their operations and cash flows for the
periods then ended subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments, any other adjustments
described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder; and are in all material respects, in accordance with the
books of account and records of Parent.
Section 4.6. Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports or as disclosed in Section 4.6 of the Parent
Disclosure Letter, from December 31, 1995 through the date of this Merger
Agreement, there has not been (i) any transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character (whether or not in
the ordinary course of business) individually or in the aggregate having a
Parent Material Adverse Effect (other than as a result of changes in laws or
regulations of general applicability); (ii) any damage, destruction or loss,
whether or not covered by insurance, which would have a Parent Material Adverse
Effect; or (iii) any entry into any commitment or transaction material to Parent
and its subsidiaries taken as a whole (including, without limitation, any
borrowing or sale of assets) except in the ordinary course of business
consistent with past practice.
Section 4.7. Employee Benefit Plans. Except as disclosed in
the Parent SEC Reports or as disclosed in Section 4.7 of the Parent Disclosure
Letter, there are no material employee benefit or compensation plans, agreements
or arrangements, including "employee benefit plans," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and including, but not limited to, plans, agreements or arrangements relating to
former employees, including, but not limited, to retiree medical plans,
maintained or contributed to by Parent or any of its subsidiaries or material
collective bargaining agreements to which Parent or any of its subsidiaries is a
party, other than "multiemployer plans," as defined in Section 3(37) of ERISA
(together, the "Parent
<PAGE>21
Benefit Plans"). To the best knowledge of Parent, no default
exists with respect to the obligations of Parent or any of its subsidiaries
under any Parent Benefit Plan, which default, alone or in the aggregate, would
have a Parent Material Adverse Effect. Since January 1, 1995, there have been no
disputes or grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation under any Parent Benefit Plans, which
have not been finally resolved, settled or otherwise disposed of (other than
claims for benefits in the ordinary course), nor, to the best knowledge of
Parent, is there any condition related to any Parent Benefit Plans which, with
notice or lapse of time or both, which failure to resolve, settle or otherwise
dispose of, alone or in the aggregate with any other such conditions, would have
a Parent Material Adverse Effect. Since January 1, 1995, there have been no
strikes, lockouts or work stoppages or slowdowns, or to the best knowledge of
Parent, jurisdictional disputes or organizing activity occurring or threatened
with respect to the business or operations of Parent or its subsidiaries which
have had or would have a Parent Material Adverse Effect.
Section 4.8. ERISA. All Parent Benefit Plans have been
administered in accordance, and are in compliance with the applicable provisions
of ERISA, except where such failures to administer or comply would not have a
Parent Material Adverse Effect. Each of the Parent Benefit Plans which is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to meet the requirements
of such section of the Code (except with respect to any such benefit plans which
have not yet been submitted to the IRS, each of which is still within the
"remedial amendment period" described in Section 401(b) of the Code), and Parent
knows of no fact which is likely to have an adverse affect on the qualified
status of such plans. None of the Parent Benefit Plans are subject to Title IV
of ERISA, and neither Parent nor any entity treated as a single employer with
Parent under Section 414(b) or (c) of the Code (a "Parent ERISA Affiliate") has
maintained such a plan during the six-year period ended on the date hereof. To
the best knowledge of Parent, there are not now nor have there been any
non-exempt "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving the Parent Benefit Plans which could
subject Parent or its subsidiaries to any penalty or tax imposed under Section
502(i) of ERISA or Section 4975 of the Code other than a de minimis penalty or
tax. Neither Parent nor any Parent ERISA Affiliate has any obligation to
contribute to, or has had within the six-year period ending on the date hereof,
any obligation to or has actually contributed to, any multiemployer plan.
Neither Parent nor any ERISA Affiliate has engaged in any transaction described
in Section
<PAGE>22
4069 of ERISA within the five-year period ending on the date
hereof.
Section 4.9. Parent Action. The Board of Directors of Parent
(at a meeting duly called and held) has by the unanimous vote of all directors
present with no abstentions (a) determined that the Parent Share Proposal is
advisable and in the best interests of Parent and its stockholders and (b)
recommended the approval of the Parent Share Proposal by the holders of Parent
Common Stock and directed that the Parent Share Proposal be submitted for
consideration by Parent's stockholders at the Parent Meeting.
Section 4.10. Fairness Opinion. Parent has received the
written opinion of Gleacher NatWest Inc., financial advisor to Parent, dated no
later than the date hereof, to the effect that the Exchange Ratio is fair to the
stockholders of Parent from a financial point of view.
Section 4.11. No Brokers. Except for Gleacher NatWest Inc., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of Parent.
Section 4.12. Parent Ownership of Company Common Stock. Parent
and its "associates" and "affiliates" (as defined under both Section 203 of the
DGCL and Rule 405 under the Securities Act), collectively beneficially own and
have beneficially owned at all times during the three-year period prior to the
date hereof less than 1% of the shares of Company Common Stock outstanding
(other than shares of Company Common Stock issuable pursuant to the Stock Option
Agreement to be entered into concurrently herewith).
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 5.1. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on its business as
it is now being conducted or currently proposed to be conducted. The Company is
duly qualified as a foreign corporation to do business, and is in
<PAGE>23
good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities or operations of the Company and its
subsidiaries taken as a whole (a "Company Material Adverse Effect"). Complete
and correct copies as of the date hereof of the Certificate of Incorporation and
By-laws of the Company and each of its subsidiaries have been delivered to
Parent as part of a disclosure letter delivered by the Company to Parent on or
prior to the date of this Merger Agreement (the "Company Disclosure Letter").
Section 5.2. Capitalization. The authorized capital stock of
the Company consists of 175,000,000 shares of Company Common Stock and 500,000
shares of preferred stock, $0.001 par value. As of April 26, 1996, (i)
32,258,139 shares of Company Common Stock were validly issued and outstanding,
fully paid and nonassessable and (ii) no shares of preferred stock were issued
and outstanding. As of the date hereof, there are no bonds, debentures, notes or
other indebtedness having the right to vote on any matters on which the
Company's stockholders may vote ("Voting Debt") issued or outstanding. As of
April 26, 1996, except for (i) options to acquire 3,232,015 shares of Company
Common Stock (the "Options"), (ii) options outstanding under the Company's
Employee Stock Purchase Plan, and (iii) the issuance of shares pursuant to the
proposed transactions described in Section 5.2 of the Company Disclosure Letter
(the "Proposed Transactions"), there are no options, warrants, calls or other
rights, agreements or commitments presently outstanding obligating the Company
to issue, deliver or sell shares of its capital stock or debt securities, or
obligating the Company to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
Section 5.3. Subsidiaries. The only Significant Subsidiaries
of the Company are disclosed in Section 5.3 of the Company Disclosure Letter,
all of which have been named in the Company SEC Reports (as hereinafter
defined). Each Significant Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is now
being conducted or currently proposed to be conducted. Each Significant
Subsidiary incorporated in the United States is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the
<PAGE>24
nature of its activities makes such qualification necessary
except where the failure to be so qualified will not have a Company Material
Adverse Effect. All the outstanding shares of capital stock of each Significant
Subsidiary are validly issued, fully paid and nonassessable and owned by the
Company or by a subsidiary of the Company free and clear of any Encumbrances.
There are no existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of any of the Significant Subsidiaries of the Company. Except
as set forth in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as disclosed in Section 5.3 of the Company Disclosure
Letter and except for wholly owned subsidiaries which are formed after the date
hereof in the ordinary course of business, the Company does not directly or
indirectly own any interest in any other corporation, partnership, joint venture
or other business association or entity.
Section 5.4. Authority Relative to this Merger Agreement.
(a) The Company has the corporate power to execute and deliver
this Merger Agreement and to carry out its obligations hereunder and,
subject to approval of the Merger Agreement by the holders of the
Company Common Stock, to carry out its obligations hereunder. The
execution and delivery of this Merger Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors. This Merger Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be
brought.
(b) Except as disclosed in Section 5.4 of the Company
Disclosure Letter, the execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby, does not
and will not result in the breach, violation, default (with or without
notice or lapse of time, or both), termination, cancellation or
acceleration of any obligation or the loss of a material benefit, under
(i) the Company's charter or by-laws or (ii) any indenture or other
loan document provision or other contract, license, franchise, permit,
order, decree, concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets, other
<PAGE>25
than, in the case of clause (ii) only, (A) any breaches,
violations, defaults, terminations, cancellations, accelerations or
losses which, either singly or in the aggregate, will not have a
Company Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby and (B) the laws and regulations
referred to in the next paragraph. Contemporaneously with the execution
and delivery of this Merger Agreement, Microsoft Corporation ("MS") has
delivered a written waiver of any (i) MS right of first refusal or
first offer contained in that certain TCP/IP Local Access Network
Agreement, dated as of March 6, 1995, by and between MS and the Company
(the "MS Agreement"), (ii) any MS right of termination of the MS
Agreement, in each case as a result of the execution and delivery of
this Merger Agreement and the consummation of the transactions
contemplated hereby, (iii) any MS right to declare a default under the
Equipment Loan Agreement dated as of March 6, 1996, between MS and the
Company as a result of the exercise of the rights granted under the
Stock Option Agreement or the consummation of the transactions
contemplated hereby and (iv) any MS right to have representation on the
Company's Board of Directors. In addition, contemporaneously with the
execution and delivery of this Merger Agreement, Microsoft Network
L.L.C. has delivered a written waiver of any right of termination of
the TCP/IP Network Access Provider Agreement, dated April 9, 1996, as a
result of the execution and delivery of this Merger Agreement and the
consummation of the transactions contemplated hereby.
(c) Except as disclosed in Section 5.4 of the Company
Disclosure Letter or transactions contemplated thereby in connection,
or in compliance, with the provisions of the HSR Act, the Securities
Act, the Exchange Act, and the corporation, securities or blue sky laws
or regulations of the various states, no filing or registration with,
or authorization, consent or approval of, any public body or authority
is necessary for the consummation by the Company of the Merger or the
other transactions contemplated hereby, other than filings,
registrations, authorizations, consents or approvals the failure of
which to make or obtain will not have a Company Material Adverse Effect
or prevent the consummation of the transactions contemplated hereby.
Section 5.5. Reports and Financial Statements. The Company has
previously furnished Parent with true and complete copies of its (i) Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31, 1995, as
filed with the Commission, (ii) proxy statements related to all meetings of its
stockholders (whether annual or special) since January 1, 1995, and (iii) all
other reports or registration statements filed by the Company with the
Commission under the
<PAGE>26
Exchange Act since December 31, 1994, except Quarterly Reports
on Form 10-Q for fiscal quarters ended prior to December 31, 1995 (the items in
clauses (i) through (iii) being referred to herein collectively as the "Company
SEC Reports"). As of their respective dates, the Company SEC Reports complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder applicable to such Company SEC
Reports. As of their respective dates, the Company SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of the Company included in the Company SEC Reports comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto. The
financial statements included in the Company SEC Reports: have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto); present
fairly, in all material respects, the financial position of the Company and its
subsidiaries as at the dates thereof and the results of their operations and
cash flow for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder; and are in all material respects, in accordance with the
books of account and records of the Company.
Section 5.6. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports or as disclosed in Section 5.6 of the
Company Disclosure Letter, from December 31, 1995 through the date of this
Merger Agreement, there has not been (i) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate having
a Company Material Adverse Effect (other than as a result of changes in laws or
regulations of general applicability); (ii) any damage, destruction or loss,
whether or not covered by insurance, which would have a Company Material Adverse
Effect; or (iii) any entry into any commitment or transaction material to the
Company and its subsidiaries taken as a whole (including, without limitation,
any borrowing or sale of assets) except in the ordinary course of business
consistent with past practice.
Section 5.7. Employee Benefit Plans. Except as disclosed in
the Company SEC Reports or as disclosed in Section 5.7 of the
<PAGE>27
Company Disclosure Letter, there are no material employee
benefit or compensation plans, agreements or arrangements, including "employee
benefit plans," as defined in Section 3(3) of ERISA, and including, but not
limited to, plans, agreements or arrangements relating to former employees,
including, but not limited, to retiree medical plans, maintained or contributed
to by the Company or any of its subsidiaries or material collective bargaining
agreements to which the Company or any of its subsidiaries is a party, other
than "multiemployer plans," as defined in Section 3(37) of ERISA (together, the
"Company Benefit Plans"). To the best knowledge of the Company, no default
exists with respect to the obligations of the Company or any of its subsidiaries
under any Company Benefit Plan, which default, alone or in the aggregate, would
have a Company Material Adverse Effect. Since January 1, 1995, there have been
no disputes or grievances subject to any grievance procedure, unfair labor
practice proceedings, arbitration or litigation under any Company Benefit Plans,
which have not been finally resolved, settled or otherwise disposed of (other
than claims for benefits in the ordinary course), nor, to the best knowledge of
the Company, is there any condition related to any Company Benefit Plans which,
with notice or lapse of time or both, which failure to resolve, settle or
otherwise dispose of, alone or in the aggregate with any other such conditions,
would have a Company Material Adverse Effect. Since January 1, 1995, there have
been no strikes, lockouts or work stoppages or slowdowns, or to the best
knowledge of the Company, jurisdictional disputes or organizing activity
occurring or threatened with respect to the business or operations of the
Company or its subsidiaries which have had or would have a Company Material
Adverse Effect.
Section 5.8. ERISA. All Company Benefit Plans have been
administered in accordance, and are in compliance with the applicable provisions
of ERISA, except where such failures to administer or comply would not have a
Company Material Adverse Effect. Each of the Company Benefit Plans which is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the IRS to meet the requirements of such section of the Code
(except with respect to any such benefit plans which have not yet been submitted
to the IRS, each of which is still within the "remedial amendment period"
described in Section 401(b) of the Code), and the Company knows of no fact which
is likely to have an adverse affect on the qualified status of such plans. None
of the Company Benefit Plans are subject to Title IV of ERISA, and neither the
Company nor any entity treated as a single employer with Company under Section
414(b) or (c) of the Code (a "Company ERISA Affiliate") has maintained such a
plan during the six-year period ended on the date hereof. To the best knowledge
of the Company, there are not now nor have there been any non-exempt "prohibited
transactions," as such term
<PAGE>28
is defined in Section 4975 of the Code or Section 406 of
ERISA, involving the Company Benefit Plans which could subject the Company or
its subsidiaries to any penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code other than a de minimis penalty or tax. Neither the
Company nor any Company ERISA Affiliate has any obligation to contribute to, or
has had within the six-year period ending on the date hereof, any obligation to
or has actually contributed to, any multiemployer plan. Neither the Company nor
any Company ERISA Affiliate has engaged in any transaction described in Section
4069 of ERISA within the five-year period ending on the date hereof.
Section 5.9. Takeover Provisions Inapplicable. Assuming the
accuracy of the representation of Parent set forth in Section 4.12, as of the
date hereof and at all times on or prior to the Effective Date, Section 203 of
the DGCL is, and shall be, inapplicable to the Merger and the transactions
contemplated by this Merger Agreement, the approval of the execution and
delivery of the Stock Option Agreement.
Section 5.10. Company Action. The Board of Directors of the
Company (at a meeting duly called and held) has by the unanimous vote of all
directors present with no abstentions (a) determined that the Merger is
advisable and fair and in the best interests of the Company and its
stockholders, (b) approved the Merger in accordance with the provisions of
Section 251 of the DGCL, (c) recommended the approval of this Merger Agreement
and the Merger by the holders of the Company Common Stock and directed that the
Merger be submitted for consideration by the Company's stockholders at the
Company Meeting, (d) taken all necessary steps to render Section 203 of the DGCL
inapplicable to the Merger and the transactions contemplated by this Merger
Agreement (assuming the accuracy of the representation of Parent set forth in
Section 4.12), and (e) adopted a resolution having the effect of causing the
Company not to be subject, to the extent permitted by applicable law, to any
state takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Merger Agreement.
Section 5.11. Fairness Opinion. The Company has received the
written opinion of Goldman, Sachs & Co., financial advisor to the Company dated
no later than the date hereof, to the effect that the Exchange Ratio is fair to
the stockholders of the Company.
Section 5.12. No Brokers. (i) Except as set forth in
Section 5.12 of the Company Disclosure Letter and for Goldman, Sachs & Co., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger
<PAGE>29
or the transactions contemplated by this Merger Agreement
based upon arrangements made by or on behalf of the Company, and (ii) the fees
and commissions payable as contemplated by this Section 5.12.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to
the Company as follows:
Section 6.1. Organization. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub was incorporated on March 27, 1996. Except as related to the
Merger, this Merger Agreement and the consummation of the transactions
contemplated hereby, Sub has not engaged in any business or activities (other
than certain organizational matters) or incurred any commitments or liabilities
since it was incorporated.
Section 6.2. Capitalization. The authorized capital stock of
Sub consists of 1,000 shares of Common Stock, par value $0.01 per share, 100
shares of which are validly issued and outstanding, fully paid and nonassessable
and, except as disclosed in Section 6.2 of the Parent Disclosure Letter, are
owned by Parent free and clear of all Encumbrances.
Section 6.3. Authority Relative to this Merger Agreement. Sub
has the corporate power to enter into this Merger Agreement and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and sole stockholder, and no other
corporate proceedings on the part of Sub are necessary to authorize this Merger
Agreement and the transactions contemplated hereby. Except as referred to herein
or in connection, or in compliance, with the provisions of the HSR Act, the
Securities Act, the Exchange Act and the corporation, securities or blue sky
laws or regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any Governmental Entity is necessary for
the consummation by Sub of the Merger or the transactions contemplated by this
Merger Agreement, other than filings, registrations, authorizations, consents or
approvals the failure to make or obtain would not prevent the consummation of
the transactions contemplated hereby.
<PAGE>30
ARTICLE VII.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1. Conduct of Business by the Company Pending the
Merger. Prior to the Effective Date, unless Parent shall otherwise agree in
writing:
(a) the Company shall, and shall cause its subsidiaries to,
carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, and
shall, and shall cause its subsidiaries to, use all reasonable efforts
to preserve intact their present business organizations, keep available
the services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business
dealings with them to the end that their goodwill and on-going
businesses shall be unimpaired at the Effective Date, except such
impairment as would not have a Company Material Adverse Effect. The
Company shall, and shall cause its subsidiaries to, (a) maintain
insurance coverages and its books, accounts and records in the usual
manner consistent with prior practices; (b) comply in all material
respects with all laws, ordinances and regulations of Governmental
Entities applicable to the Company and its subsidiaries; (c) maintain
and keep its properties and equipment in good repair, working order and
condition, ordinary wear and tear excepted; and (d) perform in all
material respects its obligations under all contracts and commitments
to which it is a party or by which it is bound, in each case other than
where the failure to so maintain, comply or perform, either
individually or in the aggregate, would result in a Company Material
Adverse Effect;
(b) except as required by this Merger Agreement the Company
shall not and shall not propose to (A) sell or pledge or agree to sell
or pledge any capital stock owned by it in any of its subsidiaries, (B)
amend its Certificate of Incorporation or By-laws, (C) split, combine
or reclassify its outstanding capital stock, or declare, set aside or
pay any dividend or other distribution payable in cash, stock or
property, or (D) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of
capital stock of the Company except for the repurchase at cost of
shares of Company Common Stock from employees, consultants or directors
of the Company upon termination of their relationship with the Company
in accordance with existing contractual rights of repurchase in favor
of the Company;
(c) the Company shall not, nor shall it permit any of its
subsidiaries to, (A) except as required by this Merger
<PAGE>31
Agreement, issue, propose to issue, deliver or sell or agree
to issue, deliver or sell any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class, any
option, rights or warrants to acquire, or securities convertible into,
shares of capital stock other than issuances of options to purchase
Company Common Stock under the Stock Option Plans on or after the date
of this Merger Agreement to employees of the Company or its
subsidiaries (including subsidiaries acquired or formed on or after the
date of this Merger Agreement) in the ordinary course of business and
consistent with past practice, other than to such employees who are
executive officers of the Company ("Permitted Options") or issuances of
Company Common Stock pursuant to the Proposed Transactions, the Stock
Purchase Plan or the exercise of options outstanding on the date of
this Merger Agreement or Permitted Options; (B) acquire, lease or
dispose or agree to acquire, lease or dispose of any capital assets or
any other assets other than (i) in the ordinary course of business or
(ii) in connection with any additional deployment or expansion of
network infrastructure requested by MS; (C) incur additional
Indebtedness or encumber or grant a security interest in any asset or
enter into any other material transaction other than in each case (i)
in the ordinary course of business, (ii) pursuant to any extension of
credit by MS, or (iii) pursuant to credit facilities in an aggregate
amount not to exceed $40,000,000; (D) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, in each case in this Clause (D) which are material,
individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, except that the Company may acquire or create new
wholly owned subsidiaries in the ordinary course of business and as
contemplated by the Proposed Transactions; (E) authorize any capital
expenditures in excess of the Company's 1996 capital expenditure budget
provided to Parent prior to the date hereof, except for capital
expenditures funded by an increase in credit facilities with MS; or (F)
enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) except as disclosed in the Company Disclosure Letter, the
Company shall not, nor shall it permit, any of its subsidiaries to,
except as required to comply with applicable law and except as provided
in Section 3.5 hereof, (A) adopt, enter into, terminate or amend any
bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, employment or other
Company Benefit Plan, agreement, trust, fund or other arrangement for
the benefit or welfare of any director,
<PAGE>32
officer or current or former employee, other than in the
ordinary course of business consistent with past practice (B) increase
in any manner the compensation or fringe benefit of any director,
officer or employee (except for normal increases in the ordinary course
of business that are consistent with past practice and that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company and its subsidiaries relative to
the level in effect prior to such amendment and except for increases
pursuant to the Company's pending 1996 salary increases in an aggregate
amount not to exceed 15% of the base salary of current employees, (C)
pay any benefit not provided under any existing plan or arrangement,
(D) grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Company Benefit Plan (including,
without limitation, the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any
benefit plans or agreements or awards made thereunder) (other than such
plans and arrangements (other than stock options) which are made in the
ordinary course of business consistent with past practice, including
Permitted Options), (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Company Benefit Plan other than
in the ordinary course of business consistent with past practice, or
(F) adopt, enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing;
(e) except as set forth on Section 7.1(e) of the Company
Disclosure Letter, the Company shall not, nor shall it permit any of
its subsidiaries to, make any investments in non-investment grade
securities exceeding $1,000,000; provided, however, that the Company
will be permitted to create new wholly owned subsidiaries in the
ordinary course of business or pursuant to the Proposed Transactions.
(f) the Company shall not, nor shall it permit any of its
subsidiaries to, take or cause to be taken any action (other than in
the ordinary course of business consistent with past practices), with
respect to accounting policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable
and collection of accounts receivable);
(g) the Company shall prepare and file all tax returns
required to be filed with respect to the Company and its subsidiaries
(or any of them) after the date of this Merger Agreement and on or
before the Effective Date in a timely manner, and in a manner
consistent with prior years and applicable laws and regulations other
than such tax returns
<PAGE>33
for which the failure to file would not have a Company
Material Adverse Effect; and
(h) the Company shall file with the Commission all reports
required to be filed under the Exchange Act on or prior to the date
each such report is due and all such reports shall comply in all
material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder applicable to such
reports and, upon such filing, shall not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
unaudited interim financial statements of the Company included in such
reports shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto and shall be
prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in
the notes thereto), shall present fairly, in all material respects, the
financial position of the Company and its subsidiaries as at the dates
thereof and the results of their operations and cash flows for the
periods then ended subject to normal year-end audit adjustments, any
other adjustments described therein and the fact that certain
information and notes shall be condensed or omitted in accordance with
the Exchange Act and the rules and regulations promulgated thereunder,
and shall be in all material respects, in accordance with the books of
account and records of the Company.
Section 7.2. Conduct of Business by Parent Pending the Merger.
Prior to the Effective Date, unless the Company shall otherwise agree in writing
or except as otherwise required by this Merger Agreement, Parent shall, and
shall cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, and shall, and shall cause its subsidiaries to, use all
reasonable efforts to preserve intact their present business organizations, keep
available the services of their present officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them to the end that their goodwill and on-going businesses shall
be unimpaired at the Effective Date. From the date of this Merger Agreement
through the Effective Date. From the date of this Merger Agreement through the
Effective Date, Parent shall not pay or declare any dividend or make any
distribution with respect to the Parent Common Stock, other than the events
contemplated by Section 3.1(c).
<PAGE>34
Section 7.3. Conduct of Business of Sub. During the period
from the date of this Merger Agreement to the Effective Date, Sub shall not
engage in any activities of any nature except as provided in or contemplated by
this Merger Agreement.
Section 7.4. Notice of Breach. Each party shall promptly give
written notice to the other party upon becoming aware of the occurrence or, to
its best knowledge, impending or threatened occurrence, of any event which would
cause or constitute a breach of any of its representations, warranties or
covenants contained or referenced in this Merger Agreement and will use all
reasonable efforts to prevent or promptly remedy the same. Any such notification
shall not be deemed an amendment of the Company Disclosure Letter or the Parent
Disclosure Letter.
ARTICLE VIII.
ADDITIONAL AGREEMENTS
Section 8.1. Access and Information. Each of the Company and
Parent and their respective subsidiaries shall afford to the other and to the
other's accountants, counsel and other representatives full access during normal
business hours after reasonable notice (and at such other times as the parties
may mutually agree) throughout the period prior to the Effective Date to all of
its properties, books, contracts, commitments, records and personnel and, during
such period, each shall furnish promptly to the other (i) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of Federal or state securities laws, and (ii) all other information concerning
its business, properties and personnel as the other may reasonably request. Each
of the Company and Parent shall hold, and shall cause their respective employees
and agents to hold, in confidence all such information in accordance with the
terms of the Confidentiality Agreement dated March 5, 1996 between Parent and
the Company.
Section 8.2. Registration Statement/Proxy Statement. Parent
and the Company shall cooperate and promptly prepare and Parent shall file with
the Commission as soon as practicable a Registration Statement of Form S-4 (the
"Form S-4") under the Securities Act, with respect to the Parent Common Stock
issuable in the Merger, a portion of which Registration Statement shall also
serve as the joint proxy statement with respect to the Company Meeting and the
Parent Meeting (the "Proxy Statement/Prospectus"). The respective parties will
cause the Proxy Statement/Prospectus and the Form S-4 to comply as to form
<PAGE>35
in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Parent shall use all reasonable efforts, and the Company will cooperate with
Parent, to have the Form S-4 declared effective by the Commission as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Merger. Parent shall, as promptly as practicable, provide copies
of any written comments received from the Commission with respect to the Form
S-4 to the Company and advise the Company of any verbal comments with respect to
the Form S-4 received from the Commission. Parent shall use its best efforts to
obtain, prior to the effective date of the Form S-4, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by the Merger Agreement and will pay all expenses
incident thereto. Parent agrees that the Proxy Statement/Prospectus and each
amendment or supplement thereto at the time of mailing thereof and at the time
of the Company Meeting and the Parent Meeting, or, in the case of the Form S-4
and each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by Parent in reliance upon and in conformity with written
information concerning the Company furnished to Parent by the Company
specifically for use in the Proxy Statement/Prospectus. The Company agrees that
the written information concerning the Company provided by it for inclusion in
the Proxy Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the Company Meeting and the Parent
Meeting, or, in the case of written information concerning the Company provided
by the Company for inclusion in the Form S-4 or any amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No amendment or
supplement to the Proxy Statement/Prospectus will be made by Parent or the
Company without the approval of the other party. Parent will advise the Company,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the Commission for amendment of the Proxy Statement/Prospectus
or the Form S-4 or comments thereon and responses thereto or requests by the
Commission for additional information. At the effective date of the registration
statement on Form S-4, all of the Parent Common
<PAGE>36
Stock to be issued in the Merger shall be covered by such
registration statement.
Section 8.3. Compliance with the Securities Act. At least 30
days prior to the Closing Date, the Company shall deliver to Parent a list of
names and addresses of those persons who were, in the Company's reasonable
judgment, at the record date for the Company Meeting, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
use all reasonable efforts to deliver or cause to be delivered to Parent, prior
to the Effective Date, from each of the Affiliates of the Company identified in
the foregoing list, an Affiliate Letter in the form attached hereto as Exhibit
8.3. Parent shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Parent Company Common Stock to be
received by such Affiliates pursuant to the terms of the Merger Agreement, and
to issue appropriate stop transfer instructions to the transfer agent for the
Parent Company Common Stock, consistent with the terms of such Affiliate
Letters.
Section 8.4. Listing. Parent shall use its best efforts to
include on Nasdaq, upon official notice of issuance, the Parent Common Stock to
be issued pursuant to the Merger.
Section 8.5. Indemnification.
(a) The By-laws and the Certificate of Incorporation of the
Surviving Corporation shall be amended prior to the Effective Date to
contain provisions identical with respect to indemnification to those
set forth in the By-laws and the Certificate of Incorporation of the
Company as in effect on the date of this Merger Agreement, which
provisions of the By-laws and the Certificate of Incorporation of the
Surviving Corporation shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Date in any
manner that would adversely affect the rights thereunder of individuals
who immediately prior to the Effective Date were directors, officers,
agents or employees of the Company. Parent and the Surviving
Corporation shall jointly and severally indemnify, defend and hold
harmless the directors, officers and agents of the Company as provided
in the Company's Certificate of Incorporation, By-Laws or
indemnification agreements, as in effect as of the date hereof, with
respect to matters occurring through the Effective Date. Parent agrees
to cause Surviving Corporation to maintain in effect for not less than
three years after the Effective Date the current
<PAGE>37
policies of directors' and officers' liability insurance
maintained by the Company with respect to matters occurring prior to
the Effective Date; provided, however, that (i) the Surviving
Corporation may substitute therefor policies of at least the same
coverage (with carriers comparable to the Company's existing carriers)
containing terms and conditions which are no less advantageous to the
officers, directors and employees of the Company and (ii) the Surviving
Corporation shall not be required to pay an annual premium for such
insurance in excess of three times the last annual premium paid prior
to the date hereof, but in such case shall purchase as much coverage as
possible for such amount.
(b) The Company's Board of Directors has consulted with
financial and legal advisors in connection with the execution, delivery
and performance by the Company of this Merger Agreement and the
approval for purposes of Section 203 of the DGCL, the transactions
contemplated by the execution and delivery of a Stock Option Agreement
by certain members of the Company's Board of Directors or an affiliate
or employer of certain members of the Company's Board of Directors, and
the Company's Board of Directors believes that the members of the
Company's Board of Directors have complied with their fiduciary duties
under Delaware law and that there is no pending or, to the best
knowledge of the Company, threatened suit, action or proceeding against
the Company or any member of the Company's Board of Directors asserting
a claim that the Company's Board of Directors or any individual member
of the Company's Board of Directors did not comply with its or his
fiduciary duties under Delaware law.
(c) In reliance upon the representations in paragraph (b),
Parent agrees to indemnify, defend and hold harmless each member of the
Company's Board of Directors that has executed and delivered, or whose
affiliate or employer has executed and delivered, a Stock Option
Agreement (each an "Indemnified Party") against any loss, claim,
damage, liability or expense, to which such Indemnified Party may
become subject, insofar, but only insofar, as such loss, claim, damage,
liability or expense arises solely out of, or is based solely upon, a
claim that an Indemnified Party's fiduciary duty as a member of the
Company's Board of Directors under Delaware law was breached by the
execution and delivery by him, or his affiliate or employer, in his or
its capacity as a stockholder of the Company, of a Stock Option
Agreement (a "Claim"). Should a court of competent jurisdiction award
damages against any Indemnified Party without specifying the portion
thereof allocable solely to the matters referred to in the preceding
sentence, the Parent and the Company shall petition such court to make
such allocation. If the court refuses to do so, the Parent and the
Company shall negotiate
<PAGE>38
in good faith to reach an agreement with respect to such
allocation.
(d) Notwithstanding the provisions of paragraph (c) above,
Parent shall have no obligation to indemnify, defend and hold harmless
any Indemnified Party pursuant to paragraph (c) unless: (i) the
representations contained in paragraph (b) above are true and (ii)
neither the Indemnified Party nor any affiliate or employer of the
Indemnified Party is a party to a Claim; provided that if the Company
is the beneficiary of any Claim, the amount that such Indemnified Party
is entitled to receive pursuant to paragraph (c) shall be reduced by an
amount equal to the pro rata amount of such Claim paid to the Company,
indirectly attributable to the Indemnified Party by reason of its
stockholdings in the Company. In addition, Parent's obligation to
indemnify, defend and hold harmless any Indemnified Party shall be
reduced by and to the extent that (i) such Indemnified Party is
indemnified pursuant to the Company's By-laws and (ii) such Indemnified
Party is indemnified from, or receive proceeds of, any insurance policy
applicable to a Claim. Each Indemnified Party shall make any and all
claims pursuant to the Company's By-laws with respect to seeking
indemnification for a Claim and shall file any and all claims under
such insurance policy with respect to a Claim and use its reasonable
efforts to file any and all claims under such By-law provisions and
insurance policy on a timely basis. If Parent shall release an
Indemnified Party from its obligations under the Stock Option Agreement
prior to the use of the Proxy granted therein at the Company Meeting or
the exercise of the option contemplated by the Stock Option Agreement,
Parent shall have no obligation to indemnify, defend and hold harmless
such Indemnified Party for loss claim, damage, liability or expense
incurred after such release.
(e) If any Claim shall be brought against an Indemnified
Party, Parent shall assume the defense thereof with counsel of its
selection, and shall have absolute discretion to settle any Claims, and
each Indemnified Party shall cooperate with the defense or settlement
thereof. After Parent has assumed the defense of such claim, Parent
shall not be liable to the Indemnified Party under this Section 8.5 for
any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof.
Section 8.6. HSR Act. The Company and Parent shall use their
best efforts to file as soon as practicable notifications under the HSR Act in
connection with the Merger and the transactions contemplated hereby, and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the
<PAGE>39
Antitrust Division of the Department of Justice for additional
information or documentation and to respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
governmental authority in connection with antitrust matters.
Section 8.7. Additional Agreements.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Merger Agreement, including using all reasonable
efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings (including, but not
limited to, filings under the HSR Act and with all applicable
Governmental Entities) and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible), subject, however, in the case of the Merger
Agreement and the Parent Share Proposal, to the appropriate vote of the
stockholders of the Company and Parent. Notwithstanding the foregoing,
there shall be no action required to be taken and no action will be
taken in order to consummate and make effective the transactions
contemplated by this Merger Agreement if such action, either alone or
together with another action, would result in a Company Material
Adverse Effect or a Parent Material Adverse Effect.
(b) In case at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of this
Merger Agreement, the proper officers and/or directors of Parent, the
Company and the Surviving Corporation shall take all such necessary
action.
(c) Following the Effective Date, Parent shall use its best
efforts to conduct the business, and shall cause the Surviving
Corporation to use its best efforts to conduct its business, except as
otherwise contemplated by this Merger Agreement, in a manner which
would not jeopardize the characterization of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 8.8. No Solicitation. Neither the Company nor any
of its subsidiaries shall, directly or indirectly, take (nor shall the Company
authorize or permit its subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take)
<PAGE>40
any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with, or furnish any information to, any person in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that nothing contained in this
Merger Agreement shall prevent the Company or its Board of Directors from (A)
furnishing non-public information to, or entering into discussions with any
person or entity in connection with an unsolicited bona fide written Acquisition
Proposal by such person or entity (including a new and unsolicited Acquisition
Proposal received by the Company after the execution of this Merger Agreement
from a person or entity whose initial contact with the Company may have been
solicited by the Company prior to the execution of this Merger Agreement) if
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such person or entity, such Board of Directors receives
from such person or entity an executed confidentiality agreement or, (B)
withdrawing the Company's Board of Directors' recommendation of the Merger
Agreement, if and only to the extent that the Company's Board of Directors
believes in good faith (after consultation with and based upon the advice of its
financial advisor) that such Acquisition Proposal would, if consummated, result
in a transaction more favorable to the Company's stockholders than the Merger
and the Board of Directors of the Company determines in good faith after
consultation with and based upon a written opinion of its outside legal counsel
that such withdrawal is necessary for the directors to comply with their
fiduciary duties to the stockholders under applicable Delaware law and that such
withdrawal will not affect the validity of the submission of the Merger
Agreement to the stockholders of the Company pursuant to Delaware law or the
enforceability of the Stock Option Agreement; or (B) complying with Rule
14e-2(a)(2) or (3) promulgated under the Exchange Act with regard to an
Acquisition Proposal. The Company will promptly communicate to Parent any
solicitation by the Company and the terms of any proposal or inquiry, including
the identity of the person and its affiliates making the same, that it may
receive in respect of any such transaction, or of any such information requested
from it or of any such negotiations or discussions being sought to be initiated
with it. "Acquisition Proposal" shall mean any proposed (A) merger,
consolidation or similar transaction involving the Company, (B) sale, lease or
other disposition directly or indirectly by merger, consolidation, share
exchange or otherwise of assets of the Company or its subsidiaries representing
10% or more of the consolidated assets of the Company and its subsidiaries, (C)
issue, sale, or other disposition of (including by way of merger, consolidation,
share exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into or exchangeable for,
<PAGE>41
such securities) representing 10% or more of the voting power
of the Company or (D) transaction in which any person shall acquire beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the
right to acquire beneficial ownership or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of 25% or more of the outstanding
Company Common Stock.
Section 8.9. Limitation on Acquisition Activities. From the
date of the Merger Agreement until the Effective Date, Parent shall not
participate in any way in discussions or negotiations with, or enter into any
agreement pursuant to which Parent would acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, in which case either (i) the
acquired business or entity is in the business of providing Internet access,
(ii) the acquisition would involve aggregate consideration in excess of
$500,000,000, or (iii) the acquisition could reasonably be expected to delay the
satisfaction of the conditions set forth in Article IX hereof.
Section 8.10. Notice of Actions. From the date of the Merger
Agreement until the Effective Date, each party shall promptly notify the other
party in writing of any pending or, to the best knowledge of the first party,
threatened action, proceeding or investigation by any Governmental Entity or any
other person (i) challenging or seeking material damages in connection with the
Merger or the conversion of the Company Common Stock into Parent Common Stock
pursuant to the Merger or (ii) seeking to restrain or prohibit the consummation
of the Merger or otherwise limit the right of Parent or, to the best knowledge
of such party, Parent's subsidiaries to own or operate all or any portion of the
businesses or assets of the Company, which in either case is reasonably likely
to have a Company Material Adverse Effect prior to or after the Effective Date,
or a Parent Material Adverse Effect after the Effective Date.
Section 8.11. Benefit Plans Generally. Parent agrees to honor
in accordance with their terms all employment, severance and similar agreements
to which the Company or any subsidiary is a party and all accrued benefits that
are vested as of the Effective Date under any Company Benefit Plan or Stock
Option Plan, except as provided by the terms thereof. Parent agrees to provide
employees of the Company and its subsidiaries with credit for all service with
the Company or its affiliates for purposes of vesting and eligibility under any
employee benefit plan, program or arrangement of Parent or its affiliates,
including all
<PAGE>42
employee equity incentive programs of Parent. To the extent
not otherwise specified in this Merger Agreement, Parent agrees that employees
of the Company and its subsidiaries who continue to be employed by the Company
or its subsidiaries after the Effective Date may continue to participate in
their current Company sponsored employee benefit programs through twelve months
following the Effective Date. After the Effective Date, the employees of the
Company and its subsidiaries shall be eligible to participate in the appropriate
employee equity incentive programs of Parent, as determined by Parent in its
sole discretion.
Section 8.12. Stockholders' Rights Plan. From the date of this
Merger Agreement until the expiration or termination of the Stock Option
Agreement, the Company shall not amend its certificate of incorporation or
otherwise take action to provide for the issuance of securities pursuant to a
stockholder rights plan or any similar program or plan.
ARTICLE IX.
CONDITIONS PRECEDENT
Section 9.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) This Merger Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of
the holders of the Company Common Stock.
(b) The Parent Share Proposal shall have been approved by the
requisite vote of the holders of the Parent capital stock.
(c) The Parent Common Stock issuable in the Merger shall have
been authorized for inclusion in Nasdaq upon official notice of
issuance.
(d) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(e) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and remain in effect and all necessary
approvals
<PAGE>43
under state securities laws relating to the issuance or
trading of the Parent Common Stock to be issued to the Company
stockholders in connection with the Merger shall have been received.
(f) No preliminary or permanent injunction or other order by
any Federal or state court in the United States which prevents the
consummation of the Merger shall have been issued and remain in effect
(each party agreeing to use its best efforts to have any such
injunction lifted).
Section 9.2. Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material
respects their agreements contained in this Merger Agreement required
to be performed on or prior to the Effective Date and the
representations and warranties of Parent and Sub contained in this
Merger Agreement shall be true in all material respects when made and
on and as of the Effective Date as if made on and as of such date
(except to the extent they relate to a particular date), and the
Company shall have received a certificate of the President or Chief
Executive Officer or a Vice President of Parent and Sub to that effect.
(b) The Company shall have received an opinion dated the
Effective Date from Heller Ehrman White & McAuliffe, counsel to the
Company, that, based upon certain factual representations of the
Company, Parent and Sub reasonably requested by such counsel, the
Merger will be treated as a reorganization within the meaning of
Section 368(a).
(c) All permits, consents, authorizations, approvals,
registrations, qualifications, designations and declarations set forth
in Section 4.4 of the Parent Disclosure Letter shall have been
obtained, and all filings and notices set forth in Section 4.4 of the
Parent Disclosure Letter shall have been submitted by Parent.
(d) Parent shall have taken all action necessary to cause Mr.
John W. Sidgmore and up to two additional individuals designated by the
Company and acceptable to Parent, to become members of the Board of
Directors of Parent subject to the consummation of the Merger.
<PAGE>44
Section 9.3. Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Date of the
additional following conditions, unless waived by Parent:
(a) The Company shall have performed in all material respects
its agreements contained in this Merger Agreement required to be
performed on or prior to the Effective Date and the representations and
warranties of the Company contained in this Merger Agreement shall be
true in all material respects when made and on and as of the Effective
Date as if made on and as of such date (except to the extent they
relate to a particular date), except as contemplated or permitted by
this Merger Agreement, and Parent and Sub shall have received a
certificate of the President or Chief Executive Officer or a Vice
President of the Company to that effect.
(b) Parent shall have received an opinion of counsel to Parent
that, the Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Code, and that the Company, Parent and Sub
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code.
(c) All permits, consents, authorizations, approvals,
registrations, qualifications, designations and declarations set forth
in Section 5.4 of the Company Disclosure Letter shall have been
obtained and to the extent required to be submitted prior to the
Effective Date, all filings and notices set forth in Section 5.4 of the
Company Disclosure Letter shall have been submitted by the Company.
(d) Parent shall have received the Affiliate Letters.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
Section 10.1. Termination. This Merger Agreement may be
terminated at any time prior to the Effective Date, whether before or after
approval by the stockholders of the Company:
(a) by mutual consent of the Board of Directors of Parent
and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated on or before November 30, 1996 (provided the
terminating party is not otherwise in material breach of its
representations, warranties or obligations under this Merger
Agreement);
<PAGE>45
(c) by the Company if any of the conditions specified in
Sections 9.1 and 9.2 have not been met or waived by the Company at such
time as such condition is no longer capable of satisfaction;
(d) by Parent if any of the conditions specified in Sections
9.1 and 9.3 have not been met or waived by Parent at such time as such
condition is no longer capable of satisfaction;
(e) by Parent if any of the following shall have occurred
(each, a "Purchase Event"):
(i) any person (other than Parent or any subsidiary
of Parent) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act), a tender offer or exchange
offer to purchase any shares of Company Common Stock such
that, upon consummation of such offer, such person would own
or control 50% or more of the then outstanding Company Common
Stock, and the Board of Directors of the Company, within ten
business days after such tender or exchange offer shall have
been so commenced, fails to recommend against acceptance of
such tender or exchange offer by its stockholders, and Parent
shall deliver a written notice of termination to the Company
within 20 business days after the expiration of such 10 day
period;
(ii) the Company or any subsidiary of the Company
shall have authorized, recommended, proposed or publicly
announced an intention to authorize, recommend or propose, or
entered into, an agreement with any person (other than Parent
or any subsidiary of Parent) to (A) effect a merger,
consolidation or similar transaction involving the Company or
any of its material subsidiaries, (B) sell, lease or otherwise
dispose of assets of the Company or its subsidiaries
representing 10% or more of the consolidated assets of the
Company and its subsidiaries (other than in the ordinary
course of business) or (C) issue, sell or otherwise dispose of
(including by way of merger, consolidation, share exchange or
any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such
securities) representing 10% or more of the voting power of
the Company or any of its subsidiaries;
(iii) any person (other than Parent, any subsidiary
of Parent or the Company or any of its subsidiaries in a
fiduciary capacity) shall have acquired beneficial ownership
(as such term is defined in Rule 13d-3 under the Exchange Act)
or the right to
<PAGE>46
acquire beneficial ownership of, or any "group" (as
such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership of, 25% or more of the then outstanding
Company Common Stock; or
(f) by either Parent or the Company if the approval of the
Company's stockholders required by Section 9.1(a) shall not have been
obtained at the Company Meeting; or
(g) by either Parent or the Company if the approval of
Parent's stockholders required by Section 9.1(b) shall not have been
obtained at the Parent Meeting.
Section 10.2. Effect of Termination. In the event of
termination of this Merger Agreement by either Parent or the Company, as
provided above, this Merger Agreement shall forthwith become void and (except
for the willful breach of this Merger Agreement by any party hereto) there shall
be no liability on the part of either the Company, Parent or Sub or their
respective officers, directors, employees or agents; provided that the last
sentence of Section 8.1 and Sections 8.5, 8.6, 8.12, 10.2 and Article XI (other
than Section 11.4) shall survive the termination.
Section 10.3. Amendment. This Merger Agreement may be amended
by the parties hereto, by or pursuant to action taken by their respective Boards
of Directors, at any time before or after approval hereof by the stockholders of
the Company and Parent, but, after such approval, no amendment shall be made
which changes the ratios at which Company Common Stock is to be converted into
Parent Common Stock as provided in Section 3.1 or which in any way materially
adversely affects the rights of such stockholders, without the further approval
of such stockholders. This Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 10.4. Extension; Waivers. At any time prior to the
Effective Date, the parties hereto, by or pursuant to action taken by their
respective Boards of Directors, may (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
<PAGE>47
ARTICLE XI.
GENERAL PROVISIONS
Section 11.1. Non-Survival of Representations, Warranties and
Agreements. All representations and warranties set forth in the Merger Agreement
shall terminate at the Effective Date. All covenants and agreements set forth in
the Merger Agreement shall survive in accordance with their terms.
Section 11.2. Notices. All notices or other communications
under this Merger Agreement shall be in writing and shall be given by delivery
in person, by facsimile, cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows (or such other address for a party as
shall be specified in a notice given in accordance with this Section 11.2) and
shall be deemed to have been given one business day after transmission by
facsimile, cable, telegram, telex or other standard form of telecommunications
or four days after deposit in the U.S. mail:
If to the Company:
UUNET Technologies, Inc.
3060 William Drive
Fairfax, Virginia 22031
Attention: John W. Sidgmore
Martina W. Knee, Esq.
Facsimile No.: (703) 206-5807
with a copy to:
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301
Attention: August J. Moretti, Esq.
and Richard Friedman, Esq.
Facsimile No.: (415) 324-0638
If to Parent or Sub:
Prior to May 18, 1996:
MFS Communications Company, Inc.
3555 Farnam Street, 2nd Floor
Omaha, Nebraska 68131
Attention: General Counsel
Facsimile No.: (402) 977-5335
<PAGE>48
On or after May 18, 1996:
MFS Communications Company, Inc.
11808 Miracle Hills Drive
Omaha, Nebraska 68154
Attention: General Counsel
Facsimile No.: (402) 231-3545
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: John S. D'Alimonte, Esq.
Facsimile No.: (212) 821-8111
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 11.3. Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Merger Agreement and the
transactions contemplated by this Merger Agreement shall be paid by the
party incurring such expenses.
(b) If (i) Parent has terminated this Agreement pursuant to
the provisions of (A) Section 10.1(f) or (B) Section 10.1(d) as such
Section relates to Section 9.3(a) and (ii) within 18-months after the
date of such termination, the Company shall either accept, or recommend
to its stockholders for approval, an Acquisition Proposal that Parent
in good faith believes would, if consummated, result in a transaction
more favorable to the stockholders of the Company than the Merger, the
Company shall pay to Parent a fee of $60,000,000, which amount shall be
payable by wire transfer of immediately available funds within two
business days after the acquisition contemplated by such Acquisition
Proposal is consummated. The obligation of the Company pursuant to this
paragraph (b) shall not be prejudiced by an exercise of termination
rights by the Company within five business days prior to the exercise
by Parent of its termination rights under this Merger Agreement.
(c) If (i) the Company has terminated this Agreement pursuant
to the provisions of (A) Section 10.1(g) or (B) Section 10.1(c) as such
Section relates to Section 9.2(a), Parent shall:
<PAGE>49
(i) pay to the Company a fee of $60,000,000, which
amount shall be payable by wire transfer of immediately
available funds within two business days after such
termination;
(ii) at the option of the Company, purchase from the
Company 1,551,724 shares of Company Common Stock (as adjusted
for stock splits, reverse stock splits, stock dividends,
recapitalizations and other similar events) for an aggregate
purchase price of $90,000,000, which purchase shall take place
on the fifth business day following the later of (A) written
notice by the Company to the Parent that a registration
statement under the Securities Act pursuant to which such
shares will be sold to the Parent has been declared effective
and (B) written notice by the Company to the Parent that the
waiting period applicable to such purchase under the HSR Act
has expired or has been terminated; and
(iii) at the option of the Company, commencing on a
date to be mutually agreed upon by the Company and Parent, but
in no event later than 180 days after notification by the
Company, provide data communications services, including
private line and local special access circuits to the Company
at Parent's cost for a period of five years, with an aggregate
total value of such circuits not to exceed $100,000,000, with
no more than $25,000,000 in any calendar year, and the cost of
such services to be jointly determined by the parties or by a
mutually acceptable third-party. Parent will provide the
Company with timely network planning information regarding
Parent's network expansions and service availability.
The obligation of Parent pursuant to this paragraph (c) shall not be
prejudiced by an exercise of termination rights by Parent within five
business days prior to the exercise by the Company of its termination
rights under this Merger Agreement.
Section 11.4. Publicity. So long as this Merger Agreement is
in effect, Parent, Sub and the Company agree to consult with each other in
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated by this Merger Agreement, and none of them
shall issue any press release or make any public statement relating to the
transactions contemplated hereby prior to such consultation, except as may be
required by law or by obligations pursuant to any listing agreement with Nasdaq.
The commencement of litigation relating to the Merger Agreement or the
transactions contemplated hereby
<PAGE>50
or any proceedings in connection therewith shall not be
deemed a violation of this Section 11.4.
Section 11.5. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Merger Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Merger
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 11.6. Assignment; Binding Effect. Neither this Merger
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, except that Sub shall
have the right to assign to Parent or any direct wholly owned subsidiary of
Parent any and all rights and obligations of Sub under this Merger Agreement.
Subject to the preceding sentence, this Merger Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Merger Agreement, expressed or implied,
except as specifically set forth in Sections 8.5 or 10.2, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Merger Agreement.
Section 11.7. Entire Agreement. This Merger Agreement, the
Exhibits, the Company Disclosure Letter, the Parent Disclosure Letter, the
Confidentiality Agreement dated March 5, 1996, between the Company and Parent
and any documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Merger
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 11.8. Governing Law. This Merger Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to its rules of conflict of laws.
Section 11.9. Counterparts. This Merger Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
<PAGE>51
Section 11.10. Headings, Table of Contents, Index of Defined
Terms. Headings of the Articles and Sections of this Merger Agreement, the Table
of Contents and the Index of Defined Terms are for the convenience of the
parties only, and shall be given no substantive or interpretive effect
whatsoever.
Section 11.11. Interpretation. In this Merger Agreement,
unless the context otherwise requires, words describing the singular number
shall include the plural and vice versa, and words denoting any gender shall
include all genders and words denoting natural persons shall include
corporations and partnerships and vice versa.
Section 11.12. Waivers. Except as provided in this Merger
Agreement, no action taken pursuant to this Merger Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this Merger
Agreement. The waiver by any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision hereunder.
Section 11.13. Severability. Any term or provision of this
Merger Agreement which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Merger Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Merger Agreement in any
other jurisdiction. If any provision of this Merger Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 11.14. Subsidiaries. As used in this Merger Agreement,
the word "subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, of which such
party directly or indirectly owns or controls at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization, or any
organization of which such party is a general partner.
[Signature pages follow.]
<PAGE>52
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Merger Agreement to be executed by their respective officers thereunder
duly authorized all as of the date first written above.
MFS COMMUNICATIONS COMPANY, INC.
/s/ James Q. Crowe
Name: James Q. Crowe
Title: Chairman and CEO
MFS GLOBAL INTERNET SERVICES, INC.
/s/ James Q. Crowe
Name: James Q. Crowe
Title: President
UUNET TECHNOLOGIES, INC.
/s/ John W. Sidgmore
Name: John W. Sidgmore
Title: President and CEO
<PAGE>1
EXHIBIT 3
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule
13D dated May 9, 1996, with respect to the Common Stock of UUNET Technologies,
Inc. is, and any amendments thereto signed by each of the undersigned shall be,
filed on behalf of each of us pursuant to and in accordance with the provisions
of Rule 13d-1(f) under the Securities Exchange Act of 1934.
This Agreement may be executed in counterparts, each of which
shall for all purposes be deemed to be an original and all of which shall
constitute one and the same instrument.
Dated: May 9, 1996
MFS Communications Company, Inc.
By: /s/ James Q. Crowe
James Q. Crowe
Chairman of the Board and
Chief Executive Officer
MFS Global Internet Services, Inc.
By: /s/ Albert L. Fenn, Jr.
Albert L. Fenn, Jr.
President
